India Dispatch: Times are going from bad to worse for Vijay Mallya, the billionaire owner of debt-saddled Kingfisher Airlines.
Kingfisher Airlines wings clipped
MUMBAI // Times are going from bad to worse for Vijay Mallya, India's "King of Good Times".
The prospects for his Kingfisher Airlines are looking increasingly bleak following the suspension of its licence to operate on Saturday, with analysts questioning whether the debt-laden airline will ever fly again.
The airline is controlled by Mr Mallya, a billionaire who also owns a Formula One team and United Breweries, a beverage company. Known for his extravagant and lavish lifestyle, Mr Mallya is often referred to by the royal moniker, which is also his company's slogan.
But Mr Mallya has little to celebrate after India's aviation regulator, the Directorate General of Civil Aviation (DGCA), suspended Kingfisher Airlines' licence because the carrier failed to submit a revival plan proving that it could operate a safe and reliable service by the deadline of Saturday.
"I find it hard to see a situation where Kingfisher flies again," said Saj Ahmad, the chief analyst at StrategicAero Research, who said that the suspension of the licence came as no surprise.
The carrier, which has not managed to turn a profit since its launch in 2005, is estimated to have debts that could lie anywhere between US$1.4 billion (Dh5.14bn) up to $2.5bn, with government-owned banks, including the State Bank of India, among the lenders that have exposure.
Kingfisher has not flown since the beginning of this month because of labour troubles. Pilots, engineers and other workers complain that they have not been paid for up to seven months.
Kingfisher has to stop taking reservations for flights because of the suspension of its licence. It noted that it had already suspended operations and closed forward bookings until November 6 before the latest action by the DGCA.
"We have in any case always maintained that once the issues with the employees are resolved, we will present our resumption plan to the DGCA for review before resuming operations," Kingfisher said.
The DGCA said that the permit was suspended until Kingfisher submitted a plan that showed that it could operate a "safe, reliable and efficient and sustainable scheduled air transport service".
"If the promoters can't put in the money then the likelihood will increase [that] more or less it won't ever actually fly," said Sharan Lillaney, an aviation analyst at Angel Broking.
The airline's operational costs and debt soared as it expanded aggressively in the years following its launch to become India's second-largest airline, promising "five-star" service. The airline was eventually forced to cut routes to cut its costs in an increasingly competitive market, shrinking to become the country's smallest scheduled airline.
The Centre for Asia Pacific Aviation has estimated Kingfisher needs $600 million to stay aloft.
Mr Mallya last month said that there were talks going on regarding the sale of a stake in the carrier, but no deal has materialised.
The airline's image is severely damaged, which would also be a challenge if it does get off the ground again, Mr Ahmad said.
"If the DGCA approves a new business plan, much will hinge on paying off existing debts before ticket sales and flights resume," he said. "And even if that hurdle is cleared, there is still little enthusiasm by customers who'd risk their money and travel plans to fly on an airline that could well be grounded again."