The government's refusal to suspend thelicence of Kingfisher Airlines, despite its crippling financial problems, is baffling as civil aviation rules clearly empower the regulator to act against a defaulting airline, unable to pay salaries, experts say.
The Vijay Mallya-owned airline faced a stunning meltdown last year after a cut-throat industry price war squeezed its cash flow, forcing it to suspend a majority of its flights and nearly halt operations. Since November last year, the company has paid monthly salaries to employees only in fits and starts and has been forced to drastically reduce its operations. It has defaulted on loans, forcing many banks to classify it as a non performing asset (NPA).
The civil aviation ministry has, so far, refused to shut down the airline, saying that Kingfisher still continues to operate the required minimum number of aircraft. The ministry has also begun moves to dilute rules that mandate the regulator to take into account an airline's financial health and status before renewing its licence.Bharat Bhushan, the former Director General of Civil Aviation (DGCA), included financial status and health as one of the parameters that the regulator must take into account when renewing a licence. The rules are referred to in government parlance as civil aviation requirement (CAR).