Kingfisher Airlines Ltd must clear debts before it is allowed to Fly again
It is unlikely that Kingfisher Airlines will be able to restart operations any time soon. This is because the Airports Authority of India (AAI), the Government’s Service Tax Department and a consortium of banks are insisting that their dues be cleared before the airline is given permission to take to the skies again.
Kingfisher owes Rs 400 crore to AAI and over Rs 7,500 crore to a consortium of 17 banks.
Airline’s Chief Executive Officer Sanjay Agarwal had met the Directorate- General of Civil Aviation (DGCA) here last week and submitted a fresh proposal for restarting the airline. According to the proposal, UB Group would pump in Rs 650 crore in the airline over 10 months to facilitate restart of its operations.
“There have been no negotiations between AAI and the airline. AAI has categorically indicated that it is not willing to put the airline on a cash and carry basis. With AAI not only operating airports around the country but also managing Air Traffic Management and Communication Navigation Surveillance, the possibility of Kingfisher restarting operations seem remote,” a person connected with the development told Business Line.
Air traffic management relates to the process, procedures and resources which airports follow to make sure that aircraft are safely guided in the skies and on the ground. The cash and carry system allows an airline to operate its flights after paying an airport in advance before a flight leaves the airport. Normally airlines, which have not defaulted on payment of dues, are allowed to operate flights and various airport charges are billed to them at the end of a specified period of time.
However, with Kingfisher AAI is not keen to follow this route as it has already burnt its fingers dealing with the airline. Kingfisher had given AAI advance cheques which bounced.
There is also a feeling that the airline has “huge liabilities” and will not be able to conduct its operations smoothly with the funds being promised by the UB Group to restart its operations.
The airline, which reported a net loss of Rs 755 crore in the third quarter ended December 31, 2012, ceased operations on October 1 last year.
|Easier said than done to reduce bad loans|
Hindu Business Line
For instance, the Kingfisher Airlines account went bad because of the unplanned expansion/acquisition without proper tie-up of funds. With little security to back the huge debt, banks appear to have little option but to take the write-off route and ...
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