Kanu Gohain, former director-general of civil aviation (DGCA) and
R Jagannathan, editor, Firstpost.com discuss the various aspects of the DGCA suspending financially-grounded KFA 's licence and the options available for the airline to recover and commence operations.
Below is a transcript of the discussion on CNBC-TV18.
Q: Finally, the DGCA has take action by suspending Kingfisher's licence which was coming up for renewal in December. At this point in time, the management has announced that it will submit a credible revival plan to the DGCA. If you were in the DGCA's position today, what would you do?
Gohain: Having experienced what Kingfisher had gone through, until and unless they bring up a very credible and revival plan which is convincing to the DGCA, I do not think the DGCA will just go by some hearsay and renew the licence or operating permit.
Today, the CEO of Kingfisher Airlines took the initiative by offering three-months' salary to the employees. But out of the total number of 4,000 employees, 3,200 are claimed to be already at work even today. I do not know how true these claims are. If 75 percent of the total strength is working, then why did the airline have to declare a lockout?
It is not only an issue of paying salaries. Kingfisher has to pay a lot of dues- it has to pay the dues to the oil companies and the airport authorities. The revival plan must contain solutions to pay off these dues.
Q: This seems to be another desperate attempt for Kingfisher Airlines to perhaps buy a little more time. What are employees suppose to do in a situation where they are caught between the devil and the deep sea?
Jagannathan: Yes. the employees do not have any choice because to remain employed they have to turn up for work, but if they turn up for work and you don't get paid, their situation remains unchanged. So I don't think they have too much of a choice.
I think they will probably have to get back to work in the hope that at least this year, after one year of declaring the possible arrival of funds, at least something is true.
But I don't think the airline is going to fly again unless Mallya is able to show the DGCA some substantial and continued flow of funds. Mallya is caught in a Catch- 22 situation where if the airline does not fly, he will not receive no funding, but if he has to get the funds, then he will have to show that the airline is running.
Q: Did the DGCA suspension come in perhaps a little too late? In a scenario where Kingfisher Airlines has been erring on flight schedules, employees haven't been paid salaries for the past seven months, holding plans submitted continued to be revised and the safety and air worthiness of aircraft is under question, what kind of credible will the DGCA actually expect from the promoters of this company?
Gohain: I have never agreed to the point that the DGCA had given a long time for Kingfisher. In the DGCA, there are certain regulations governing scheduled air transport services. It was made very clear that as long as the airline fulfills the conditions of the schedule operating permit issued, there arises no question of closing down the airline or of suspending the permit.
Suspending the licence of an airline is a process. First a show cause notice was issued and the airline's management was given an opportunity to explain how they will continue to operate the airline.
The airline did submit some plans as requested and when the plans failed to persuade the regulator, the airline was again asked to submit detailed plans. So the airline's licence was suspended only after it repeatedly failed to present a plan.
Q: In your assessment, do you believe this is the end as far as Kingfisher Airlines is concerned? Do you believe that Kingfisher Airlines can be miraculously revived?
Gohain: No, in this industry there are no miracles. It operates on simple facts starting infusion of capital by the management of Kingfisher. The airline has to pay its dues of close to Rs 7,000 crore. So the airline has to clear its dues, re-induct its employees and then again apply to the DGCA.
Q: What is the way ahead? Kingfisher CEO Sanjay Aggarwal has no indicated the source of funds to pay the airline's employees and the lenders' consortium of 17 banks led by the State Bank of India have been left dangling after restructuring of loans in November 2010.
Jagannathan:. Actually the lenders did have a choice, but they chose not to exercise that choice because their dues are pending and most of them have already turned NPAs even after the restructuring.
So if they are still not moving in then they are failing their own shareholders and stakeholders. It is because the lenders have failed to exert pressure on Kingfisher Airlines that the promoter of the airline has been able continue to hold other parties at bay with promises of generating the required funds when there is no sign of it.
