The Vijay Mallya-owned airline faced a stunning meltdown last year after a cut-throat industry price war squeezed its cash flow, forcing it to suspend a majority of its flights and nearly halt operations. Since November last year, the company has paid monthly salaries to employees only in fits and starts and has been forced to drastically reduce its operations. It has defaulted on loans, forcing many banks to classify it as a non performing asset (NPA).
The civil aviation ministry has, so far, refused to shut down the airline, saying that Kingfisher still continues to operate the required minimum number of aircraft. The ministry has also begun moves to dilute rules that mandate the regulator to take into account an airline's financial health and status before renewing its licence. Bharat Bhushan, the former Director General of Civil Aviation(DGCA), included financial status and health as one of the parameters that the regulator must take into account when renewing a licence. The rules are referred to in government parlance as civil aviation requirement (CAR).
The civil aviation ministry has, so far, refused to shut down the airline, saying that Kingfisher still continues to operate the required minimum number of aircraft. The ministry has also begun moves to dilute rules that mandate the regulator to take into account an airline's financial health and status before renewing its licence. Bharat Bhushan, the former Director General of Civil Aviation(DGCA), included financial status and health as one of the parameters that the regulator must take into account when renewing a licence. The rules are referred to in government parlance as civil aviation requirement (CAR).
"The issue has to be seen in two stages, the first would involve a constant monitoring of any airline that is going through a financial crisis from close quarters and having found any evidence of the same in the second stage the regulators need to take action as the mandate that they have is to ensure safety on all costs," said Peeyush Naidu, director, Infrastructure Consulting, Deloitte.
The CARclearly says that the air operator's permit is dependant upon a number of things, including financial status and health. "Further expansion of fleet and operations, including Air Operator's Permit, shall be subject to mitigation of the potential risk factors identified during the financial survey by the operator to the satisfaction of the DGCA," the CAR points out.
Factors that will be included in the assessment include issues pertaining to significant lay offs/turnover of personnel, delays in meeting payroll, decreased standards of training, a reason to believe reduction of safe operating standards or evidence of cutting corners, demand for 'cash and delivery' by suppliers who formerly granted the operator credit, shortage of supply of spares and sale and repossessions of aircraft and other equipment.
Kingfisher Airlineswas plagued by most of these issues in the past one year though the airline insists that its financial troubles have not affected training and safety standards one bit. "We are not prepared to comment on information from phantom sources. We are in constant touch with DGCA. We have not received any queries or communication on the lines suggested. We are operating to the highest safety standards under supervision of DGCA," a Kingfisher spokesperson said.
The government though is clear that it will not ask Kingfisher to shut shop for as yet. "Till such time as the airline can operate within the limit of laid guidelines of maintaining five aircraft in its fleet there is no move to suspend the licence of Kingfisher. We will still give it a long rope for making a turnaround as the airline says is possible," said a civil aviation ministry official not wanting to be identified.
Kingfisher's auditors in the latest annual report said that the airline has under reported loss by Rs 1,116 crore. Excluding the impact of certain accounting methods, the loss would have been Rs 3,444 crore instead of Rs 2,328 crore, the auditors have said.
The airline is struggling to make payments to its employees and is facing large-scale attrition. The annual report shows the number of employees dipped drastically to 5,696 with 1,651 quitting to join rival carriers.
The CARclearly says that the air operator's permit is dependant upon a number of things, including financial status and health. "Further expansion of fleet and operations, including Air Operator's Permit, shall be subject to mitigation of the potential risk factors identified during the financial survey by the operator to the satisfaction of the DGCA," the CAR points out.
Factors that will be included in the assessment include issues pertaining to significant lay offs/turnover of personnel, delays in meeting payroll, decreased standards of training, a reason to believe reduction of safe operating standards or evidence of cutting corners, demand for 'cash and delivery' by suppliers who formerly granted the operator credit, shortage of supply of spares and sale and repossessions of aircraft and other equipment.
Kingfisher Airlineswas plagued by most of these issues in the past one year though the airline insists that its financial troubles have not affected training and safety standards one bit. "We are not prepared to comment on information from phantom sources. We are in constant touch with DGCA. We have not received any queries or communication on the lines suggested. We are operating to the highest safety standards under supervision of DGCA," a Kingfisher spokesperson said.
The government though is clear that it will not ask Kingfisher to shut shop for as yet. "Till such time as the airline can operate within the limit of laid guidelines of maintaining five aircraft in its fleet there is no move to suspend the licence of Kingfisher. We will still give it a long rope for making a turnaround as the airline says is possible," said a civil aviation ministry official not wanting to be identified.
Kingfisher's auditors in the latest annual report said that the airline has under reported loss by Rs 1,116 crore. Excluding the impact of certain accounting methods, the loss would have been Rs 3,444 crore instead of Rs 2,328 crore, the auditors have said.
The airline is struggling to make payments to its employees and is facing large-scale attrition. The annual report shows the number of employees dipped drastically to 5,696 with 1,651 quitting to join rival carriers.
