Indian Regulator Meeting Kingfisher, Air India

January 5, 2012

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India's aviation regulator is meeting executives from cash-strapped Kingfisher Airlines and Air India Express, the budget arm of state carrier Air India on Thursday, seeking an explanation on safety concerns highlighted by the regulator's internal report.

"We are careful that financial stringency should not impinge on safety. So on that basis, we had done this (internal report) and there are several steps which have to be taken by the airlines," said Bharat Bhushan, director general of civil aviation.

Earlier on Thursday, a Times of India report, citing the regulator's report, said that a reasonable case exists for withdrawal of Kingfisher's license as its financial stress is likely to impinge on the safety of passengers.

Kingfisher, controlled by flamboyant drinks baron Vijay Mallya, is facing rough weather after it cut flights late last year and ground aircraft to offset a cash crunch.

Bhushan said that as many as one-third of a carrier's fleet were on ground, which The Times of India report identified as Kingfisher.

"So they can't ask for slots, occupy everything and cancel things, and put people to inconvenience. How are they doing the regular maintenance and all those things, we propose to look at."

Kingfisher, reacting to the report, said that it was operating flights with "utmost safety" and would respond to the questions raised by the regulator at the meeting.

"This is an audit which the DGCA carried out (which they can carry out on any airline) following which it has submitted a list of questions to us which we are going to reply to, at the meeting today," a Kingfisher spokesman said.

Most airlines in India, including the largest carrier Jet Airways are loss making, hit by high fuel costs, an ongoing price war and a slowdown in the economy.

Kingfisher and Air India have been negotiating with banks for further cushion to ease their debt burden and for more working capital. Both firms have undergone debt restructuring.

A government report viewed by reporters says the total debts of India's airlines are expected to rise to USD$20 billion in the 2011/12 year ending March as they struggle with rising oil prices, high sales taxes on jet fuel and below-cost pricing driven by fierce competition.

(Reuters)