Bankers play hard, PM hints at govt help

Lenders to Kingfisher Airlines have said the promoters of the carrier must meet their commitment of infusing equity. Any further support — including debt restructuring — could be considered only after that.

Meanwhile, Prime Minister Manmohan Singh hinted at a bailout of sorts for the cash-strapped airline. On board Air India One on his way back from Addu (Maldives), where he had gone to attend the Saarc summit, he said: “We have to find out ways to get Kingfisher out of trouble. But I have not applied my mind to Kingfisher’s problems. When I get back, I will talk to Mr Vayalar Ravi.”

At the time of restructuring of loans last year, Kingfisher promoter Vijay Mallya had committed to bring in about $300 million through global depository receipts.

“That stipulation has not been met as yet,” a senior public sector bank official said after a meeting between banks and the ailing airline concluded in Bangalore on Saturday.

In an effort to get urgent credit support, Kingfisher, promoted by the Bangalore-based UB group, on Saturday made a detailed presentation to lenders on additional funding requirements and the steps taken to salvage conditions.

In the meeting, Kingfisher officials suggested that the banks convert their fund-based facilities into bank guarantees. This would help the airline use the guarantees and release cash deposits from aircraft’s lessors, leading to an immediate interest saving of a few hundred crores of rupees.

Senior UB Group officials confirmed that the meeting was smooth. They added they were hopeful that bankers would agree, given the external factors that have taken a toll on the airline industry. “During the financial restructuring package, we had accounted for crude oil to be in the range of $80-90 a barrel, but now it is $115 a barrel. The rupee at that time was around Rs 40 to per dollar. It is close to Rs 50 a dollar now,” a senior UB Group board member told Business Standard. Company officials hoped banks would extend an additional working capital of around Rs 300 crore.

Analysts also indicate that discussions have opened with Sahara Group for a possible support. However, a Sahara group spokesperson denied any discussions had taken place. Kingfisher Airlines, ever since it acquired Deccan Aviation, has been trying to raise equity to the extent of around $300 million, but efforts have not yielded much. This has led to a ballooning debt, now at Rs 7,000 crore.

Senior UB Group officials added the group’s flagship spirits company, United Spirits Ltd (USL), had initiated discussions with Citigroup Venture Capital for a possible equity infusion of $200 million. “If Mallya can raise resources by offloading his stake in USL, those resources can be channeled into Kingfisher Airlines,” investment bankers close to the group added. “Earlier, talks were on with Citigroup Venture Capital for reducing debt in USL. But, with USL largely managing to service its debt, the additional resources may be used to infuse equity into Kingfisher Airlines,” bankers added. The UB Group management declined to comment.

Even as these strategy decisions are understood to be debated at various levels, Kingfisher Airlines is trying to put things in place and get its operations back in shape.

“According to the revised schedule, we will offer 300 daily flights, connecting 54 cities, compared to the previous schedule of 340 flights. The revised schedule is being loaded in the system and guests can confidently continue to book Kingfisher flights,” Kingfisher Airline CEO Sanjay Aggarwal said.

He added that the reconfiguration initiative would require up to three aircraft to be out of service over the next three months at any one time. “It will reduce the number of fleet configurations from seven to three, improving operational flexibility. This initiative will add more seats to the fleet, improving revenue generation of each aircraft,” he claimed.