India's Kingfisher may face prolonged shutdown; shares slide

Wed Oct 3, 2012 7:19am EDT
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By Anurag Kotoky

NEW DELHI (Reuters) - India's Kingfisher Airlines Ltd (KING.NS: Quote), which has cancelled all flights through Thursday, faces a potentially prolonged shutdown until the cash-strapped carrier clears a salary backlog going back half a year.

The government is taking a tougher stance after allowing the airline to operate for months without paying salaries, although it has stopped short of forcing a closure of the heavily indebted carrier. Kingfisher has debt of $1.4 billion, owed mostly to government-controlled banks including State Bank of India (SBI.NS: Quote), the country's top lender.

"There is a stalemate," Vikrant Patkar, a Mumbai-based pilot in command, told reporters on Wednesday after a meeting with Kingfisher's chief executive and chief operating officers.

"The company has refused to pay us seven months of salary. So we will not let any flight to operate at least from Delhi, Mumbai and Bangalore," he said.

The airline, controlled by liquor baron Vijay Mallya, won't get the government's approval to resume flying before it pays staff salaries and submits an acceptable recovery plan, a senior official at the aviation regulator told reporters on Tuesday, declining to be identified as the negotiations are private.

Unhappiness among the rank and file came to a head over the weekend when technicians and engineers staged a protest that the airline said turned violent. Kingfisher has halted all flights since Monday due to the labor unrest and said it will decide on Thursday whether to lift a partial lockout of staff on Friday.

"This is going to last for a long time," said Sharan Lillaney, an aviation analyst at Angel Broking in Mumbai.

The airline loses 40 million rupees ($760,100) a day if it flies and twice that if it doesn't, a senior government source said. The airline declined to comment on its daily losses.   Continued...

Passengers stand at a Kingfisher Airlines reservation office at the domestic airport in Mumbai October 1, 2012. REUTERS/Danish Siddiqui