New Delhi fears implications of Kingfisher collapse

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Worries about massive disruptions at airports and fears about rising air fares are partly why the Indian authorities have not pulled the plug on Kingfisher Airlines.

"We don't want massive disruptions. Kingfisher's recent cancellations are causing problems but these are not as big as what would be caused by a shutdown of the airline. India needs the connectivity that all of its airlines offer and we want competition," said a senior government official, who asked to remain anonymous, on the sidelines of the India Aviation 2012 show in Hyderabad.

"[Letting Kingfisher collapse] would also drive up fares and there is already a lot of opposition to that. That may actually help the airlines make money, but there would be a political backlash."

Bharat Bhushan, India's director general of civil aviation, told Flightglobal Pro that the problems at Kingfisher Airlines "cannot go on" indefinitely and that a solution has to be found soon.

The floundering carrier has been cancelling dozens of domestic and international services and grounded several aircraft, resulting in severe disruptions. The bank accounts of the airline, which has not made a profit in its five-year existence, have also been frozen by the Indian tax authorities, exacerbating the already severe cash crunch.

Bhusan said there were no grounds yet to suspend Kingfisher's license - the minimum requirement in India is for an airline to have a minimum of five aircraft operating safely according to the country's regulations. However, he hinted that patience was running thin.

"This is a fast evolving situation. We have been asking for information, but that is not forthcoming," said Bhusan. "This is a matter of great concern and the situation cannot go on."

There are measures that the DGCA is considering, said Bhushan without elaborating. The agency's immediate focus is on making sure that Kingfisher's aircraft are safe for operations, he added.

When the airline gives up its slots, as it has done over the last few weeks, these will be given to other airlines, he added.

India's civil aviation minister Ajit Singh also said at the show that there would be no government bailout for Kingfisher.

"It is a private business. I'm not saying that it cannot close down, but the government will not ask the banks to lend it money. It has to convince the banks about its viability," he said.