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DGCA to KFA: Ensure UB Group funds

Source : BUSINESS_STANDARD
Last Updated: Sun, Dec 30, 2012 00:10 hrs
Customers stand at a Kingfisher Airlines reservation office at the domestic airport in Mumbai

The directorate general of civil aviation (DGCA) met Hitesh Patel, chief financial officer (CFO) of Kingfisher Airlines (KFA), today, asking the airline to seek assurance from the United Breweries (UB) Group on the funding of Rs 652 crore, in line with the carrier's revival plan to start limited operations.

"We have asked KFA for commitment to funding. We would like to see an assurance from the UB Group on the financing of the revival plan. KFA must satisfy the various stakeholders with the revival plan, and should engage in talks with them," DGCA sources said.

"The licence suspension will be revoked only after the stakeholders are convinced with the plan. We have received letters from the Airport Authority of India (AAI) and Mumbai International Airport Ltd not to let KFA fly till its dues are cleared," they added.

DGCA has also asked KFA to furnish further financial details, as the plan was absolutely silent on the payment of dues to vendors (airport operators, oil companies etc) and lenders. However, no deadline has been set for their submission.

The meeting happened shortly after the civil aviation minister, Ajit singh, criticised KFA's funding plan, questioning its very premise, saying, "The plan is more of Mr Mallya's wish. We did not get a commitment from the UB Group for the funding."

KFA CEO Sanjay Aggarwal on Monday submitted to the DGCA an interim revival plan for limited resumption of the debt-ridden air carrier's operations - with a funding of Rs 652 crore from UB Group's resources over 12 months, as banks are unwilling to extend further credit.

As per the plan, the operations are planned to be restarted on a cash-and-carry basis, with airport operators and oil companies with a fleet of five Airbus and two ATR turboprop aircraft six-eight weeks after KFA's licence suspension is revoked. DGCA sources confirmed, the fleet could be be scaled up to 11 ATRs and 10 Airbus planes within 10 weeks.

The Rs 652-crore funding would be for payment of Rs 120-crore salary dues, refurbishment of planes and daily operating losses. We are examining the plan and would require more financial details.

The Kingfisher CEO is understood to have informed DGCA that the salary dues would be cleared by giving two months' wages and back wages each month from next month onwards.

While the airline had Rs 250 crore due to AAI, its officials claimed there were no dues to oil companies (except interest payments due to HPCL). KFA is understood to be negotiating with airport operators to settle their dues.

Also, KFA pilots would have to go for refresher training and medical tests before they start operating flights as they have not been flying for months now. An official said, with payment to lessors of the initial planned fleet on time, five Airbus and two ATR planes were ready to fly.

The Kingfisher Airlines scrip fell down by 1.8 per cent to Rs 15.28 on BSE today.

On October 20, DGCA had temporarily suspended the scheduled operator's permit (SOP) of the Vijay Mallya-promoted carrier following a strike of its pilots and engineers over non-payment of salaries for several months. This had completely grounded its fleet.

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