Banks give Kingfisher 15 days to come up with revival plan

Airline told to sell non-core assets

Mumbai, July 5:

Banks have told Kingfisher Airlines to come up with a concrete action plan to improve its operations within a fortnight. Currently, the private carrier’s operations are hobbled. Its fleet strength has dropped to 13 from 64 last November.

With the debt-laden airline reportedly defaulting on lease rentals of over Rs 1,000 crore, lessors recently repossessed 34 aircraft.

Bankers say that given its current fleet strength and truncated operations schedule, the beleaguered airline cannot be turned around.

While the airline promoter is banking on the proposed liberalisation in foreign direct investment in the aviation sector, bankers’ patience appears to be wearing thin. Debtor-creditor meetings held so far have not yielded any result.

Small dent in debt

The airline has been asked to put non-core assets — Kingfisher House in Mumbai and the promoter’s villa in Goa — on the block. This will lighten its debt burden, but only a tad.

Pointing out that the airline’s assets will barely cover 10 per cent of the Rs 7,000 crore,it owes a consortium of 17 banks, a senior public sector bank official said if banks precipitate action then the corporate guarantee and promoter guarantee for loans taken could be invoked.

However, the cash-strapped airline, in a statement, said the meeting with the consortium of bankers was scheduled as an “update meeting” and there was “no discussion on commencement of recovery proceedings”.

“Kingfisher House has been lying vacant after the staff moved to our new offices at The Qube in Mumbai, and even at that time, on our own accord, we approached the banks with a proposal to liquidate this unutilised asset. At today’s meeting, we raised the issue of this pending approval,” the KFA spokesperson said.

Kingfisher House was the airline’s corporate headquarters till it decided to put the building on the block to raise funds. The airline is planning to raise between Rs 90-100 crore selling this building.

Market share

In late-September last year, Mr Vijay Mallya, Chairman of UB Group, said the company had moved into a new building in Mumbai and that Kingfisher House was redundant. “So, we will obviously look to sell it. Any initiative that we can take to reduce our debt is going to be pursued,” he had said then.

KFA saw its domestic market share fall from second to the last in just six months.

Global airline consultancy firm Centre for Asia Pacific Aviation (CAPA) estimates that Kingfisher Airlines has a funding requirement of close to $1 billion, of which $500-600 million is needed immediately. CAPA estimates an additional funding requirement of $300-400 million in the next fiscal.

http://www.thehindubusinessline.com/todays-paper/article3607131.ece