German bank sues DGCA, Kingfisher Airlines

People are silhouetted as Kingfisher Airlines' aircrafts are seen parked at an airport in New Delhi October 1, 2012.

NEW DELHI (Reuters) - Germany's DVB Bank SE has sued aviation regulator Directorate General of Civil Aviation (DGCA) and Kingfisher Airlines to have two planes it financed for the troubled carrier deregistered, a possible first step towards recouping its funds.

The case underlines the problems that leasing firms and financing companies face in recovering grounded planes from Kingfisher, as airports, banks and tax authorities scramble for the crisis-hit carrier's assets.

International Lease Finance Corp (ILFC) - owned by U.S. insurer AIG - is also struggling to take back Kingfisher planes it owns, one of which, an Airbus A-320, has been impounded by tax authorities for non-payment of dues by the carrier.

The DGCA must deregister the DVB-financed Airbus planes, now parked in Istanbul, before the bank can put them to use or lease them out.

"Our main trouble really is with the DGCA, which should deregister the aircraft," Carsten Gerlach, senior vice president of aviation finance at DVB, told Reuters.

"We have now filed a writ petition at the High Court in Delhi against DGCA and also Kingfisher, strictly focused on deregistration," Gerlach said by phone from Frankfurt.

However, the DGCA argues that those aircraft were not financed by DVB alone, so deregistering them would make the DGCA answerable to other financiers, who are also trying to recover their money, according to a senior government source with direct knowledge of the situation.

The DGCA and Kingfisher did not respond to requests for comment.

Meanwhile, leasing company IFCL has also asked the DGCA to deregister four Kingfisher-operated planes, but it faces separate obstacles.

These planes include an Airbus A-320 parked at Mumbai airport that was impounded by tax authorities last week after the carrier failed to settle long-pending dues.

"People just go the airport, see a plane in Kingfisher colours, and stake their claim on it," the source said, referring to the tax authorities' impounding of the Airbus.

"What they don't understand is that the plane may not belong to Kingfisher at all."

Kingfisher, owned by flamboyant liquor baron Vijay Mallya, has hit back at the tax authorities' actions, saying it is illegal for authorities to seize aircraft that are owned by foreign lessors.

"This will send a very wrong signal to any foreigner who wishes to do business in the aviation industry in India," the airline said in a statement last week.

Kingfisher has 33 scheduled passenger planes registered in India, according to data from the DGCA. It had a fleet of 64 a year back, when it was India's No. 2 carrier by market share.

It is saddled with a combined debt load of $2.5 billion, according to one estimate, and has not paid salaries for months.

Kingfisher, which has not flown since October, had its license suspended in October after months of canceled flights and staff walkouts.

(Editing by John Chalmers and David Holmes)