Kingfisher Has Not Sought Govt Bailout, Says Mallya

Battling financial crisis, Kingfisher Airlines Chairman, Mr Vijay Mallya,said that he has not asked for a bailout from the government but wants the lenders to help with 700-800 crore working capital as short-term needs and interest concessions.

Facing all-round attack from political parties which are opposing any bailout for his airline, Mr Mallya said: “We have not asked for any bailout from government. We have not asked the government to dip into the taxpayers’ money. We have never done it, we will never do it.”

 After announcing the second quarter results, which showed a loss of Rs 468.66 crore, he told a press conference that “we are in dialogue with banks to open Letters of Credit which can help us recover debt and repay our high cost rupee loans.”

“We have not asked for a concession. We have not asked for a hair-cut. Our demands with the banks are mainly two-folds. One is to meet short-term capital needs which have gone up and concession on interest,” he said.

The banks have not told him formally that “we should infuse capital. If there is requirement of recapitalisation or infusion of additional equity, we will consider it.”

Mr Mallya also said he has not sought any restructuring of the loan.

Kingfisher has suffered a loss of Rs 1,027 crore in 2010-11 and has a mounting debt of Rs 7,057.08 crore. Together, the 13-bank consortium now holds 23.4 per cent stake in the airline and has an exposure of over Rs 7,700 crore.

Asked how much working capital would the airlines need, Mr Mallya said: “We require Rs 700-800 crore, which includes both fund and non-fund based. ... We have pursued every opportunity to raise capital.”

Welcoming the Prime Minister Dr Manmohan Singh’s recent statement that the Government would find ways to solve the aviation industry’s financial troubles, he said: “The Prime Minister is an economist who understands the importance of connectivity.”

About the dues to oil companies, he said the airline has paid two state-owned oil companies — Indian Oil and Bharat Petroleum — in full. “We don’t owe them a single paise.”

On the Rs 600-crore worth of unsecured dues to HPCL, the Chairman said the oil firm has been given bank guarantees “and our unsecured credit has now come down to Rs 40 crore only’’.

The chief of the UB Group, which runs Kingfisher, also announced that the company has applied to the Directorate General of Foreign Trade (DGFT) for direct import of jet fuel, which would reduce fuel costs drastically. Jet fuel costs are almost 50 per cent of the total operating costs of the airline.

Mr Mallya also said there were varied credit lines with various suppliers and vendors of the airline and refuted reports that certain lessors wanted to take back some of the leased aircraft in the Kingfisher fleet.

Referring to the cancellation of more than 200 flights over the past week, he justified the move saying it was a “commercially prudent” decision.

“We cancelled flights not because we could not afford to. Even today Kingfisher is operating the rest of its schedule ... We could have handled the situation better. But it (flight cancellations) was a commercially prudent decision,” he said.

Debt Crisis at Kingfisher Airlines Makes it Sell Property

Flying at the heights of terrain and making profits out of it is something gorgeous. But at the sametime falling from the peak of success gives an unbearable damage that cannot be recovered soon. The same thing happened with the Kingfisher Airlines which is struggling to recover from its debts fallen on it.

Kingfisher is a valued company, but an airline would need fuel, fleet and finance to run the show. Facing serious financial turbulence, Kingfisher Airlines has sought government help for a bailout even as it continued its flight curtailment spree for the fifth consecutive day on Friday and its stocks plummeted by over 19 percent to an all-time low but recovered slightly later.

The seriousness of the crisis was underlined by the urgent request Kingfisher owner Vijay Mallya made to Finance Minister Pranab Mukherjee and Civil Aviation Minister Vayalar Ravi to help Kingfisher in infusion of funds through banks at low interest rates, besides other concessions in line with what Air India was getting.

However, there was no official word immediately on whether any step was being taken on Mallya's request made earlier this week. Some 50 pilots and cabin crew did not turn up for duty by reporting sick as over 40 flights were cancelled across its network today.

 Innumerable passengers across the country cancelled Kingfisher flight tickets to travel by other airlines, though after paying 20-40 percent higher at the last moment. The airline, which had earlier said it would restore its flights after October 19, has now indicated that it would take a few more weeks to normalize the flight schedule, which would go into the peak winter season air traffic.

DGCA has issued the notice under Rule 140(A) of the Aircraft Rules, 1937, asking Kingfisher why it had not taken the regulator's prior approval to curtail its flight schedules as required by this rule. It has also sought to know whether the airline had taken any step to facilitate the passengers inconvenienced by the cancellations.

Meanwhile, all the oil PSUs, HPCL, IOC and BPCL, have denied extending credit line to the liquor baron Mallya-owned airline and asked it to pay for lifting jet fuel on a daily basis. The airline has suffered a loss of 1,027 crore in 2010-11 and has a mounting debt of 7057.08 crore.

The board of Kingfisher Airlines (KFA) will consider a proposal to cut debt by more than half by selling property, converting loans from its parent company into equity, and changing the terms under which it leases aircraft. The management of the airline, which has cancelled 200 flights in the past week, leading to fears it is close to bankruptcy, says its plan will result in debt coming down from Rs 6,500 crore to Rs 3,000 crore.

U.S. Carriers Unhappy With American Aid to Air India

Calling Air India "one of the most poorly-run airlines in the world", American carriers have opposed the US Exim Bank's $3.4 billion support to it to buy Boeing 787 Dreamliners.

The Air Transport Association (ATA), a trade group representing America's biggest carriers, has shot off a letter to US Export-Import Bank Chairman Fred Hochberg opposing the decision, saying Air India's financial ill-health should disqualify it from getting American help.

 The US Exim Bank had last month decided to give loan guarantees of $1.3 billion to support Air India's fleet acquisition from Boeing and another $2.1 billion preliminary commitment to support future deliveries of the US aerospace company's planes to the Indian national carrier.

A decision to this effect was taken early October by the Board of Directors of the Export-Import Bank of the US.

In its response, Exim Bank's general counsel said the bank stood by its decisions and processes, though it would investigate some of ATA's assertions about its procedures, a report in the Wall Street Journal said.

"Air India's borrowing is backed by a sovereign guarantee of the Indian government and its business plan has been vetted by Exim Bank staff," the report quoted a US government official as saying.

The official said support to foreign buyers of Boeing planes was important since if the US plane maker could not sell airplanes to foreign buyers like Air India, its chief rival Europe's Airbus probably would.

Air India has pending orders for 27 Boeing Dreamliners, the deliveries of which are expected to begin by the end of this year. These are part of the 68-aircraft order placed by the national carrier with the US plane manufacturer.

The Exim Bank support will enable Air India raise finances for acquiring the latest technology aircraft at competitive interest rates compared to commercial financing.

ATA opposed Exim Bank's backing for Boeing sales, partly because US airlines are not eligible to receive it as domestic purchases are not considered exports, the report said.

It quoted ATA's counsel Michael Kellogg as saying that the organisation was unhappy with the US government subsidies to foreign buyers of Boeing jetliners since "the bank's support for foreign airlines injures US carriers."

Kellog said Air India is "generally considered one of the shakiest, riskiest and most poorly-run airlines in the world."

The letter, which focussed on Air India, asked Exim Bank to slash subsidies to all overseas buyers of Boeing jets.

The letter, quoted by the WSJ, states that Air India's "long-running financial losses and widely reported management problems should disqualify it for US support."

ATA also criticised Exim Bank for not being sufficiently open about its decision making.

Billionaire Mallya’s Kingfisher Slumps Most in 3 Years, Seeks India’s Help

Kingfisher Airlines Ltd. (KAIR), controlled by billionaire Vijay Mallya, slumped in Mumbai after it cut flights and approached India’s government for help as it works to restructure debt and pare losses.

The airline, India’s second-biggest by market share, fell as much as 19 percent, the most in intraday trading since November 2008. It was down 9.7 percent at 19.6 rupees as of 3:04 p.m. United Breweries (Holdings) Ltd., Mallya’s holding company and Bangalore-based Kingfisher’s biggest shareholder, declined as much as 17 percent.

India’s finance ministry may ask banks to help Kingfisher restructure its debt after the carrier sought the government’s assistance, Civil Aviation Minister Vayalar Ravi said in New Delhi today. Kingfisher has scrapped 167 flights since Nov. 8 and some of its lessors plan to reclaim aircraft because of overdue fees, the Economic Times newspaper reported, without saying where it got the information.

“Unless there is an infusion of money at this point, I don’t really see how it’s going to survive,” said Rishikesha Krishnan, a professor of corporate strategy at the Indian Institute of Management, Bangalore, who has written papers about Indian aviation. “That infusion of money has to come from Mallya. I can’t see anybody else who’s going to put money in.”

Prakash Mirpuri, a Kingfisher spokesman, said in a mobile- phone text message that he is on medical leave, and referred calls to Kingfisher’s external public relations agency. Kingfisher Chief Executive Officer Sanjay Aggarwal didn’t answer text messages and four calls to his mobile phone. Mobile phones of Mallya, the carrier’s chairman and managing director, were switched off.
New Planes

Kingfisher has posted losses totaling about 47 billion rupees ($935 million) over the last three years as it added new planes and competed against state-owned Air India Ltd. Earlier this year, it won as much as 12.1 billion rupees of new loans after banks agreed to convert 13 billion rupees of existing debt into preferred shares.

The airline isn’t operating 36 percent of flights it has scheduled for the winter season, E.K. Bharat Bhushan, Director General of Civil Aviation, said in New Delhi. The slots at airports that Kingfisher isn’t using will be given to other carriers, he said without elaboration.

Mallya, 55, doubled personal guarantees against the carrier’s debt to 61.7 billion rupees in the year ended March, according to the airline’s annual report. The carrier paid him 508.7 million rupees for loan assurances, said the report, published in September.
Debt Guarantees

United Breweries also more than doubled its debt guarantees to 168.5 billion rupees. The company, which owns 40 percent of Kingfisher, has dropped 71 percent this year.

Kingfisher has about $1.5 billion of debt and a debt-to- asset ratio of 82, according to data compiled by Bloomberg. Jet Airways (India) Ltd., the nation’s largest carrier, has a debt- to-asset ratio of 67. SpiceJet Ltd. (SJET), India’s only listed budget carrier, has a ratio of 7.7.

Kingfisher and SpiceJet have tumbled about 70 percent this year, while Jet Airways dropped 65 percent as they struggle to turn surging travel demand into profit. Jet has posted losses for at least four years. The number of domestic passengers in India rose 18.6 percent this year through August to 39.6 million, according to the Director General of Civil Aviation’s website.
Promoting Beer

Mallya formed Kingfisher Airlines in 2005, naming it after the beer UB Group brews under the Kingfisher brand. He handpicked each of the flight attendants and instructed them to treat passengers as “guests in my own home,” according to a video shown on Kingfisher flights.

In 2008, Kingfisher completed a merger with Deccan Aviation Ltd., which operated India’s first low-cost airline, Air Deccan. Kingfisher had a fleet of 66 planes ranging from Avions De Transport Regional turboprops to Airbus SAS A330s as of March 31, according to its annual report.

The carrier has also ordered five Airbus A380 planes, which it expects to start taking delivery from 2016.

Mallya inherited the UB Group from his father in 1983 at the age of 27. He has since built United Breweries into India’s biggest brewer and United Spirits Ltd. acquired brands including Whyte & Mackay.

Mallya had a net worth of $1.1 billion, and was ranked 49th among India’s billionaires, according to Forbes magazine.

Source : Bloomberg.com

India's Kingfisher shares at life low, cancellations continue

India's Kingfisher Airlines shares slumped 18% to a life low on Friday as the airline continued to cancel flights and newspapers reported leasing companies were planning to take planes back and pilots were leaving.
The airline's chief executive officer Sanjay Aggarwal told television channel NDTV Profit 100 pilots had quit over the past months, but said it was part of natural attrition and the current cancellations were not on account of staff shortages.

Kingfisher, India's second-largest private airline, run by liquor baron Vijay Mallya, has struggled to raise cash to operate its cost-intensive business in a highly competitive market place.

It had cancelled scores of flights daily since Sunday in an effort to cut capacity and minimise costs, leaving passengers stranded as the Indian travel season enters the peak period.

"There is no doubt in our mind as a management team or Dr Mallya as a promoter of the airline, or the UB Group, about the credibility or the future of the airline," Aggarwal said.

The Economic Times newspaper reported on Friday that some companies who have lent aircraft to the loss-making airline planned to take them back. It also said the Director General of Civil Aviation had sought an explanation from the airline for the mass cancellation. A Kingfisher spokesman declined to provide immediate comment to Reuters.

Six weeks ago Kingfisher had announced intentions to recast its business model by doing away with its low-cost service Kingfisher Red. It said on Tuesday it has started reorganising its aircraft in an effort to focus on the full-service market and that required some of its flights to be out of service for the next few weeks. Once the reconfiguration is complete the aircraft will be pressed back in service it said.

"No shutdown, only ensuring loss minimisation by a flight rationalisation and enhanced revenue through reconfiguration of aircraft," Chairman Vijay Mallya was quoted by Economic Times as saying on Friday.
At 1:13 pm, Kingfisher shares were down 12.2% at 19.05 rupees, off a low of 17.7 rupees, while the BSE indexwas down 1.28 percent. Shares of UB Holdingswere down 11.75%.

STRUGGLING TO SURVIVE

Kingfisher shares have lost more than 67% of value so far this year. The airline, which started business as a full service carrier in 2005 and listed when it bought out budget airline, Air Deccan in 2008, has never made a profit.

Its auditors noted in the annual report this year that the firm needs extra cash to survive in a challenging market. Kingfisher had aimed to raise $250-$350 million through an issue of global depositary receipts in January but did not follow through on the plan. It also tried to attract private equity investment in 2008 and 2009 but no deal was forthcoming.

Earlier this year, Kingfisher cut its debt through a restructuring by issuing shares to 14 banks, including State Bank of India and ICICI Bank. But its problems continue. Just last week it said it had written to banks for further help by substituting high-cost rupee borrowings with lower cost foreign currency debt and asked them to consider the weakening rupee and high international fuel prices when appraising its working capital requirements.

"The only way out is they sell a stake to a foreign airline company if the government passes the rule anytime soon, which I think they can, given the circumstances of the whole industry," said Sharan Lillaney, analyst at Angel Broking.

India currently allows foreign investment of up to 49% in Indian carriers, but foreign airlines are not allowed to invest directly or indirectly in domestic carriers. But India's industry secretary said last month that the government was likely to approve a plan to allow foreign airlines to buy stakes in Indian carriers.

Source : Dnaindia