Vijay Mallya’s Kingfisher Airlines plans to seek compensation from the manufacturer of the engine that led to the grounding of nine of its Airbus 320 aircraft. Though the company spokesperson declined to comment on the compensation amount, industry sources put it at Rs 1,000 crore. An airline executive said the figure would include cost of repair and revenue losses due to grounding the aircraft.

"As a result of the identified engine issue, there were extraordinary repair costs on account of other engine issues after the aircraft went for repair. Revenue losses would also be a part of the compensation," said the executive, who did not want to be identified.

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An email question to the spokesperson of the engine manufacturer did not elicit any response.

IAE V2500 engines fitted on the airplanes of Kingfisher Airlines experienced technical issues with the HPC stage 3-8 drum assembly. There were issues with the silver nuts in the engine, which broke due to excessive heat.

India’s largest low-cost carrier, IndiGo, which operates 27 Airbus 320 aircraft, faced similar problems with the engine. The problem was rectified by the engine manufacturer, as IndiGo has a post-delivery agreement with the company on this.

Kingfisher, which operates 375 flights a day to 71 destinations in India and abroad, had reported net loss of Rs 1,647.2 crore in the financial year ended this March. It reported a net loss of Rs 187 crore in the first quarter of the current financial year.

The airline had debt of Rs 7,413 crore as of December 2009. The merchant banking arm of State Bank of India (SBI) is preparing a debt recast plan. SBI had earlier rejected a proposal to recast Kingfisher's Rs 2,099-crore short-term debt.

The airline has hired Seabury Aviation & Aerospace, a US-based company, to advise on sustaining its long-term profitability by strengthening the operational and financial performance.

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