India's Kingfisher cancels flights on employee unrest, shares fall

New Delhi Mon Oct 1, 2012 2:20am EDT

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New Delhi (Reuters) - India's Kingfisher Airlines Ltd (KING.NS) said it was cancelling several flights on Monday due to employee unrest, in a fresh blow to the ailing carrier and sending its shares down by their daily limit of 5 percent.

The airline was cancelling flights on Monday because it feared a number of its employees were unlikely to report for work due to threats from other workers, said Kingfisher, which is owned by billionaire Vijay Mallya.

"A section of employees of Kingfisher Airlines has not been reporting for work over the last fortnight and over the past two days, they have been threatening and even manhandling the other employees who are reporting for work," Kingfisher spokesman Prakash Mirpuri said in a statement.

All Kingfisher flights scheduled to depart from the New Delhi airport until 4:30 p.m. (1100 GMT) have been cancelled, the airport's website showed.

The Mint newspaper reported that the airline's ground staff refused to attach an air bridge to a plane in Mumbai on Sunday, stranding passengers onboard, while some engineers beat up an executive. A company spokesman was not immediately available to comment on the report.

It was the first instance of employee violence at Kingfisher, which has not paid salaries for months, and is under the constant watch of regulators, tax authorities and banks.

Kingfisher is saddled with $1.4 billion debt and has grounded most of its fleet. Banks have refused to lend it more money unless it can infuse fresh funds into the airline.

Last week, its banks held inconclusive talks about the carrier's turnaround plan on Thursday and will meet again this month.

Last month India decided to allow foreign airlines to buy stakes of up to 49 percent in local carriers, a long-awaited policy move hard lobbied for by Kingfisher, that could provide a lifeline to the country's debt-laden operators.

No carrier has publicly expressed interest in buying a stake in Kingfisher, but chairman Mallya told shareholders last Wednesday he was in talks with foreign carriers for investments, reiterating comments he has made over the past year without any concrete developments.

Kingfisher shares were down 5 percent at 15.35 rupees as of 9:50 a.m. (0420 GMT) on the National Stock Exchange. The stock has recovered sharply on funding hopes after hitting a life-time low of 7.05 rupees in mid-August.

(Reporting by Anurag Kotoky; Editing by Chris Gallagher)

(This story was corrected in paragraph 8 to say banks will meet again this month, not next; this version also corrects paragraph 9 to say FDI rules were relaxed last month, and not earlier this month)

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