(Repeats to additional subscribers)
* Clear salary backlog before flying again - regulator
* Situation at 'stalemate' - pilot in command
* Shares down around 5 pct for third straight session
By Anurag Kotoky
NEW DELHI, Oct 3 India's Kingfisher Airlines Ltd
, 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, 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 labour 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.
While shutting down saves the embattled airline money, the
grounding of its fleet deals a further blow to its ability to
win back passengers should it resume operations.
"Even if they start, nobody is going to buy their tickets
now. People cannot afford inconvenience at such a time when
there are other options available with similar service and at
the same price," Lillaney said.
Kingfisher is now the smallest among India's six main
carriers, and its steep decline has enabled rivals such as Jet
Airways India Ltd and IndiGo to raise fares in what had
been a ferociously competitive market plagued by overcapacity.
On Wednesday, shares in Kingfisher lost nearly 5 percent,
their daily limit, for the third straight session.
NO PROFIT, NO PAYCHECK
Kingfisher, which as recently as last year was India's No.2
airline by market share, has never earned a profit since it was
founded in 2005. It has also defaulted on payments to banks,
airports and oil companies.
Kingfisher plans to use 600 million rupees in bank accounts
frozen by authorities to pay staff, the industry regulator said
on Tuesday, but it was unclear how it was going to get at those
funds. Tax officials froze Kingfisher accounts earlier this year
after it failed to deposit taxes deducted from staff.
One senior member of Kingfisher's ground staff, who declined
to be named, said the company told employees on Wednesday that
they would be paid only for March, not in full.
A Kingfisher spokesman declined to comment.
"As soon as they get some salary, they will move out. How
long can you run your house without salary?" the employee said.
Kingfisher is half a year or more behind on salaries. Its
employee expenses for the year that ended in March totalled 6.7
billion rupees, although many staff have left since then.
SEARCH FOR SAVIOUR
Kingfisher has been scrambling to find investors. While it
has said it is in talks with global airlines for a potential
investment, no airline has publicly expressed an interest.
India recently let foreign airlines own up to 49 percent of
Indian carriers in a move long lobbied for by Kingfisher.
However, Kingfisher's attractiveness is undermined not just
by its debt but by a tough Indian operating environment that saw
all but one major carrier lose money last year.
So far, its banks have refused to lend it more money without
an additional funding infusion.
"As far as we are concerned this is something which is not
entirely shocking or unanticipated," S. Vishvanathan, deputy
managing director at State Bank of India, the airline's lead
lender, told Reuters on Wednesday.
"We have known that Kingfisher is having increasing
problems. So the final solution hinges on how the capital will
be infused, how the cash flow will improve," he said.
Big Indian companies rarely fail. Instead, banks typically
extend credit to large clients to see them through difficult
times, with state lenders especially willing to cut troubled
companies slack rather than force a time-consuming liquidation.
But many smaller airlines, including MDLR Airlines, have
been grounded in recent years.
The latest crisis at Kingfisher started when disgruntled
engineers responsible for aircraft safety checks threatened
other employees reporting to work.
Before the shutdown, Kingfisher operated just 10 planes out
of a fleet that once numbered 64, the regulator said.
According to Indian rules, an airline has to fly at least 5
planes to retain its status as a scheduled carrier.
($1 = 52.6250 Indian rupees)
(Additional reporting by Kaustubh Kulkarni and Swati Pandey in
MUMBAI; Editing by Tony Munroe and Ryan Woo)