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Kingfisher Airlines to lose operating license

Dec 31, 2012 6:46 am

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Without providing information on new financing, Kingfisher’s operating license will expire, although it can seek reinstatement if the airline can find an investor.

— Dennis Schaal

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Kingfisher Airlines Ltd.’s operating license will lapse tonight, after the grounded Indian carrier failed to convince authorities it has enough funds to restart operations following five straight years of losses.

The carrier can seek to renew the license within two years, an aviation ministry official, who declined to be identified citing rules, said. A revival plan the airline submitted to the nation’s aviation regulator last week wasn’t backed by details of funding, Civil Aviation Minister Ajit Singh said Dec. 26.

Kingfisher, controlled by liquor tycoon Vijay Mallya, has been seeking cash for more than two years and said it’s in talks with possible investors, including Etihad Airways PJSC. The airline may start on a smaller scale with funds provided by its parent UB Group before selling a stake to an investor, according to Kapil Kaul of the CAPA Centre for Aviation.

“There would be a gradual resumption, which could be more determined and focused on a very realistic business scale,” Kaul, the head of CAPA’s Indian unit, said. “Once they start, they could build a 20-plane operation and then the second stage of capitalization will come from an investor.”

Shares Decline

Shares of Kingfisher fell 2.3 percent to 14.90 rupees at close of trading in Mumbai. The stock declined 29 percent this year, after plunging 68 percent in 2011.

Kingfisher’s permit, issued in August 2003, is valid until today, according to the Directorate General of Civil Aviation’s website. The carrier is yet to provide information on funding sought by the regulator, the ministry official said.

Kingfisher spokesman Prakash Mirpuri didn’t respond to an e-mail and a call to his mobile phone seeking comment. The plan presented to the DGCA includes the money needed to support the revival, Mirpuri said Dec. 26. The company will show the availability of funds as soon as the regulator is satisfied with the proposal, he said.

In September, Prime Minister Manmohan Singh’s government eased airline ownership rules allowing overseas carriers to own as much as 49 percent in local operators. Jet Airways (India) Ltd., the nation’s largest listed carrier, is also said to be in talks with Etihad for a stake sale.

The aviation regulator suspended Kingfisher’s permit in October following flight disruptions caused by strikes triggered by unpaid wages. Employees later agreed to resume work after management pledged to pay salaries.

Kingfisher, which was No. 2 in India by market share last year, has piled up debt of 85 billion rupees ($1.6 billion). It pared more than two-thirds of its flights and returned planes to lessors before halting operations in October.

–Editor: Vipin V. Nair

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Vipin V. Nair at vnair12@bloomberg.net

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