India's Kingfisher called out on debt, safety

Kingfisher Airlines A320. By Rob Finlayson

Trouble continued to mount for India's Kingfisher Airlines (IT) as both its largest creditor and the country's top aviation official publicly criticized the carrier.

State Bank of India (SBI) chairman Pratip Chaudhuri told reporters that IT has been classified as a non-performing asset. "They are in default … Kingfisher has been unable to pay its dues," he said, according to multiple media reports from India. SBI is IT's largest creditor.

Meanwhile, India's Directorate General of Civil Aviation (DGCA) carried out an audit of Indian airlines that found, unsurprisingly, severe "financial stress" in the domestic industry. But, in particular, the audit report said "a reasonable case exists for withdrawal of [IT's] airline operator permit as their financial stress is likely to impinge on safety." According to The Times of India, the DGCA said that nearly a third of IT's fleet of 64 aircraft "are grounded due to want of spares, engines, components, etc."

DGCA head Bharat Bhushan walked back the report slightly, emphasizing that IT is not in imminent danger of losing its operating license. But he told the Financial Times: "They need to pull up their socks, otherwise they risk being grounded … They need to address some of the problems we have found and reassure us that their financial troubles will not affect passengers' safety."

In a statement, IT said that "DGCA has asked Kingfisher Airlines to provide a specific timeline for getting the grounded aircraft back in the air and for its recapitalization efforts. We would like to reassure our valued guests that at Kingfisher Airlines safety is of paramount importance, and that our scheduled flights will continue to operate with utmost safety in full compliance with regulatory requirements."

IT, founded in 2005 by United Brewery tycoon Vijay Mallya, is reportedly considering a major cost-cutting program (ATW Daily News, Jan. 5). Mallya had hoped an alliance formed with Jet Airways in late 2008 would solve IT's long-running fiscal problems (ATW Daily News, Oct. 15, 2008).