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Corporate Jan 15, 2013

Would staff manage Kingfisher better than Mallya?

By Sindhu Bhattacharya

New Delhi: The fate of Kingfisher Airlines hangs by a thin thread which could well snap before the week ends, if lenders decide to pull the plug.

While this may bring some perverse relief to Chairman Vijay Mallya who seems quite uninterested in running the airline, employees fear a dark future. This prospect of no work and no assurance of getting any salary dues has propelled a handful of senior airline employees in Mumbai to suggest that Mallya allow them to run the company.

A senior pilot spoke to Firstpost at length about why employees would be better able to manage a debt-laden airline, infuse much-needed capital into it by roping in large business houses and how the "trust" factor would return when employees manage the company rather than when people like Mallya do.

Employees, though optimistic and capable in their own lines of work, have little to show in terms of any concrete turnaround plan.AFP

But will this ambitious plan work? Employees, though optimistic and capable in their own lines of work, have little to show in terms of any concrete turnaround plan. Besides, why would Mallya agree to transfer operations to employees and thereby concede that he has been unable to run what was once the country's largest airline by passengers carried?

Other problems could also surface: such management control transfer would need cumbersome Government approvals, it cannot succeed without employee unity and very few employees would have any management experience despite being good airline hands.

Yesterday, there were reports of Kingfisher flight engineers in Delhi thinking of filing of a closure petition against the airline instead of seeking management control.

Meanwhile, the pilot told Firstpost that in a meeting with Executive Vice-President Hitesh Patel yesterday, around 15 senior pilots have proposed that either Mallya gives them details about any recapitalisation plan he has for the airline or allow them to run Kingfisher themselves. They have sought a meeting with Mallya before Friday. These employees plan to rope in other co-workers and present a detailed plan for management takeover to the Civil Aviation Ministry in due course.

While assuring these employees of a meeting with Mallya before the lenders' meet which is scheduled for Friday, Patel is believed to have indicated that the Kingfisher management, led by CEO Sanjay Aggarwal, has been in New Delhi talking to Japan's All Nippon Airways (ANA) for a possible strategic investment.

There seems to be no clarity yet on whether talks with Abu Dhabi's Etihad Airways have concluded or are still on.

Employees should be forgiven for disbelieving any news of fresh talks with any potential investor and they have brushed aside any prospect of talks with ANA too. Too many times in the past Mallya has led them up the garden path with nothing to show at the end of these purported talks.

Even if there is a modicum of truth in Kingfisher and ANA holding preliminary talks, there would be a very long winded and painful path to any money flowing into Kingfisher if the Japanese airline were to forge an alliance.

According to the ANA website, it is the eighth largest airline in the world by revenues (as of 2011) and the largest in Japan by passenger numbers (as of 2011). ANA has a fleet of 233 aircraft and operates about 1,000 flights a day. In 2011, it carried 43 million passengers and generated revenues of $17.1 billion.

Like Etihad, ANA would also need to see an operational airline before it forms any view on investing in loss laden Kingfisher. And this is something Mallya is unlikely to manage - an airline which gets back to the skies.

Aviation regulator DGCA has already punched enough holes in Kingfisher's recovery plan, saying it is not convinced of the airline's ability to generate Rs 652 crore promised for partial revival, and wants assurance on employee salary arrears and vendor dues.

Top sources in the Ministry of Civil Aviation have repeatedly indicated that Mallya himself does not appear sincere in running the airline and that unless they are certain of his ability to infuse promised funds, the airline will not be allowed to start again.

On their part, lenders appear to be divided on whether to start recovery proceedings or give the airline more time to generate funds.

Kingfisher's flying licence (scheduled operator's permit) expired on December 31 but the airline has been grounded since October one last year.

Not only does it have Rs 16,000 crore worth of liabilities (losses and debt), now the Service Tax Department has issued notices to the airline on confiscating its entire aircraft fleet for defaulting on the levy amounting to Rs 60 crore.

by Sindhu Bhattacharya

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