Still Optimistic about Kingfisher Airlines

Lenders to Kingfisher Airlines will meet in the week starting December 16 to decide on their future course of action regarding their Rs. 7,000 crore exposure to the beleaguered airline, Shyamal Acharya, deputy managing director of SBI, told NDTV. Most of the lenders have classified their loans to the airline as non-performing assets.

Mr Acharya said SBI had waited long for Kingfisher to clear its dues, adding, however, that the bank was still optimistic that the loan will be repaid.

At the meeting Diageo funds will also be discussed, he added. On November 9, the companies jointly announced that Diageo will acquire a controlling 53.4 per cent stake in Vijay Mallya-promoted United Spirits for Rs. 11,166 crore (nearly $2 billion). (Read: Diageo strikes Rs. 11,000 crore deal with Mallya's United Spirits)

However, United Breweries group chairman Vijay Mallya has made it clear that the United Spirits deal will have no implications on the Kingfisher situation. After the deal was announced, Mr Mallya said both United Spirits and Kingfisher would be dealt as two separate situations.

The liquor baron’s deal to sell a stake in United Spirits could throw a lifeline to his grounded Kingfisher Airlines, but pulling the carrier back from the brink will not be easy. His decision to give up control of his group's flagship company as Kingfisher heads towards the point of no return suggests that he is unwilling to write off his airline business, bankers and industry analysts had said when the deal was struck.

The proceeds from Mr Mallya's deal with Diageo will not be enough in themselves to rescue the ailing airline, which has failed so far to find fresh investment to prop it up or a global carrier willing to play white knight. It could still give him enough to make a piecemeal payment to his creditors and draw them back to the negotiating table for fresh loans and another restructuring of the airline's debt.

Kingfisher’s brand value has gone down, Mr Acharya told NDTV, adding that it would like to hike its exposure, at Rs. 1,500 crore currently, to the airline.

SBI has an exposure of Rs. 1,500 crore to the Bangalore-based airline, which has not been serviced since January this year. Launched in May 2005, the airline has not reported a single penny in profit and has bank debt over Rs. 7,000 crore and unpaid interest thereon since January, apart from over Rs. 1,000 crore in vendor and tax arrears. It also has accumulated losses of nearly Rs. 10,000 crore, apart from the salary dues of the past seven months. The Centre for Asia Pacific Aviation has said a fully funded turnaround for Kingfisher would cost at least $1 billion.

Labour unrest towards the end of September led to the airline suspending operations from October 1 and on 19th of the same month, the regulator DGCA had suspended its flying licence till further orders for its failure to come up with a viable plan of financial and operational revival.

Airport operators have also asked the DGCA to keep on hold the renewal of Kingfisher's license, which is slated to expire on December 31, until their dues are cleared.

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