Phuket: Banks put Kingfisher into final, fatal dive
INDIA: Shares of India’s debt-laden Kingfisher Airlines plunged on Wednesday last week after banks said they would start recalling loans worth US$1.5 billion (B45 billion), which analysts said spelled the end for the carrier.
Wednesday 27 February 2013, 04:15PM
The firm, controlled by Indian liquor baron Vijay Mallya, slid five per cent – its daily limit – before clawing back some losses to trade down 4.58 per cent in mid-afternoon.
“The banks’ decision to start the recovery process means the end of the road for Kingfisher” if they carry it through, said Kapil Kaul, regional head of leading aviation consultancy CAPA.
The creditor banks’ announcement late Tuesday that they would begin recalling the outstanding loans paves the way for the sale of Kingfisher assets held as collateral.
“We have decided to recall the loans made to Kingfisher Airlines,” said Shymal Acharya, a deputy managing director of the government-owned State Bank of India, which heads the consortium of bank lenders.
A spokesman for Bangalore-based Kingfisher he could not immediately comment on the banks’ decision.
“I am not able to wager a guess [when the airline will be able to comment],” said Prakash Mirpuri, an airline vice president.
The carrier, whose planes have been grounded since October, has never made a profit since it began flying in 2005. In addition to the bank debts, it also owes vast sums to airports, fuel suppliers and its staff.
Kingfisher has a number of real estate assets that it put up as collateral against its loans, including its office in Mumbai, but analysts said most of its planes were on lease and the lessors have taken them back.
“It is over for Kingfisher – it was over one year ago,” said Sharan Lillaney, aviation analyst at Mumbai’s Angel Broking.
The airline, once India’s second-biggest carrier and known for its red-carpet service, posted a net loss of 7.55 billion rupees (B4.3 billion) in the three months to December.
“We had given them [the airline] many chances to come back with a specific positive action plan about their restart plans. But they could not come up with any concrete action plan,” Acharya told reporters.
“There is no reason for us to give further time to the company,” he added.
Kingfisher, which made costly acquisitions as it sought to grow its business, was the worst-hit of India’s airlines last year, as the industry fell victim to high aviation fuel costs, a price war and shabby airport infrastructure.
Mallya, who dubs himself “the king of good times”, has been desperately scouting for a foreign airline or other investors to put money into Kingfisher to get it flying again.
But analysts expressed doubts whether any investor would be interested, given a debt load that is estimated by CAPA to total US$2.5 billion (B75 billion).
Mallya is expected to get some funds from the US$2 billion sale of a majority stake in India’s United Spirits but that deal must still clear regulatory hurdles.
The tycoon in the past has insisted he will not use his other businesses to “cross-subsidise” the airline.