Force India does not have enough money to race in 2013 UPDATE Kingfisher Airlines, Vijay Mallya's ailing carrier, on Monday submitted its revival plan to the Directorate General of Civil Aviation (DGCA) in a bid to restart limited operations after having remained grounded for almost three months.
Kingfisher had a few weeks ago submitted an application for renewal of its flying permit, which is due to expire on December 31. The permit was suspended by DGCA on October 20.
DGCA officials had then said a decision to renew or revoke the suspension of its Standard Operating Permit (SOP) cannot be taken till it submitted a comprehensive financial and operational revival plan, that was given Monday.
"The airline has submitted its revival plan, which we had sought as a precondition for revoking its suspended flying license," an official of DGCA told PTI.
The official, however, did not elaborate on the revival plan of Kingfisher Airlines.
DGCA had on October 20 temporarily suspended the SOP of the Vijay Mallya-promoted carrier following a strike by its pilots and engineers over non-payment of salaries for several months, which completely grounded the fleet.
The cash-strapped airline is yet to pay its staff for seven months now. Mallya told the 17 lenders consortium weeks ago that he was preparing to restart limited operations with a planned fund infusion of Rs 425 crore through internal resources.
"We will restart operations in a phased manner and will provide funding ourselves. We have not asked the banks for any support. We have also shared full recapitalization plan (with the lenders) which will be further discussed with a small designated group of bankers," the airline had then said.
Kingfisher, which has a debt of nearly Rs 8,000 crore and accumulated losses and liabilities of a similar amount, has been grounded since October 1 after its pilots and engineers went on strike.11/10/12 [Editor's Note: Get those ride-buyers lined up.] One of the most difficult questions to answer at the moment in F1 is whether or not Force India has enough money for 2013, or whether the much-publicized troubles of its two partners mean that the team is going to be short of cash. This has a number of knock-on effects, not least being the choice of drivers. If the team has plenty of money, then it can pick its drivers at will, if not it will need to look for those with funding behind them.
The fears have been raised because Vijay Mallya and Subrata Roy Sahara are both in financial difficulties, independently of one another. Mallya is the Icarus of India, a beer baron who started an airline and has burned his wings badly. Kingfisher Airlines is in deep debt. A couple of days ago it reported a loss of $139.4 million in its second quarter. The airline has struggled to pay its staff and its planes have been grounded for a month. No-one knows for sure how much Kingfisher owes, but estimates have been as high as $2.5 billion. Creditors want the airline to bring in new money by the end of the month, but analysts say that reviving the airline will cost at least $1 billion. There is also a threat that the airline’s license will not be renewed if it does not come up with a restructuring plan by the end of December. Mallya has pledged nearly 95 percent of the shares in the business and that means that lenders would be able to grab shares in his profitable liquor companies, if Kingfisher Airlines fails.
For some time there has been talk of a sale of Mallya’s United Spirits company. He has said that he will not sell not sell “the family silver”. On Friday the British spirit company Diageo announced that it has agreed to buy a 53.4 percent stake United Spirits for $2 billion. Mallya will stay on as chairman but he has lost control of the most lucrative part of his empire. The good news is that he might now be able to start rebuilding Kingfisher Airlines and that he can continue to fund his F1 team.
At the same time as all this is going on, Subrata Roy Sahara needs to pay the Securities and Exchange Board of India (SEBI) the sum of $4.4 billion by November 15, plus 15 percent interest. SEBI will then distribute the money to Sahara’s investors. If the payments are not made his bank accounts will be frozen and assets seized.
The word in F1 circles is that the team is already using its TV money to pay for its Mercedes engine deal (as other teams are doing with their TV money). A key element in its season has been a technology deal with McLaren but this was due to run out at the end of the season and has not thus far been renewed. More at Joe Saward