October 25, 2012 / 10:21 AM / 5 years ago

UPDATE 1-Kingfisher Airlines staff agree to resume work, CEO says

* Carrier’s licence remains suspended

* Shares rise by their daily limit

* Aviation minister says challenges go beyond salaries (Adds details, background)

By Arup Roychoudhury

NEW DELHI, Oct 25 (Reuters) - Employees of India’s grounded Kingfisher Airlines Ltd have agreed to return to work, the embattled carrier’s chief executive said on Thursday after meeting with staff, who have not received their salaries since March.

The airline founded by liquor baron Vijay Mallya, which has not flown since the start of October after an employee protest turned violent, still must convince the aviation regulator to reinstate its licence, which was suspended on Saturday.

“All employees have agreed to resume duty right now. They are on duty as we speak ... We are all in this together and looking forward to getting the airline going in the next few weeks,” CEO Sanjay Aggarwal told reporters.

Shares in Kingfisher were up 4.83 percent, effectively at their 5 percent daily limit, after falling by a similar amount in each of the four previous sessions.

Earlier this week, Kingfisher offered to pay three months wages by Nov. 13 and clear arrears every month after that, were striking employees to restart work by Friday.

ŸThe airline, which was once India’s second-largest by domestic market share, has never made a profit since its launch in 2005, and has total debt of nearly $2.5 billion, according to an estimate by the Centre for Asia Pacific Aviation, a consultancy.

On Saturday, India’s Directorate General of Civil Aviation (DGCA) suspended the airline’s licence after the carrier failed to address its concerns over safety.

“The salary is a big issue and the employees should be paid. But the larger issue than that is their fiscal assurance to the DGCA”, Ajit Singh, India’s civil aviation minister, told the ET Now TV station earlier on Thursday.

“They have a lot of outstanding (debts) to the airports authority, to oil companies, to the leasing companies. So it’s not just a question of salary ... To allow them to fly again, DGCA is to be satisfied on many more things,” Singh said.

Kingfisher has been scrambling for investors to inject fresh capital into it, and had lobbied for a recent Indian rule change that allows foreign carriers to buy up to 49 percent of an Indian airline. However, no international carrier has publicly expressed interest in taking a stake in Kingfisher. (Additional reporting by Kaustubh Kulkarni in MUMBAI; Writing by Tony Munroe; Editing by Daniel Magnowski)

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