Even as banks get ready to provide additional funding to cash-strapped Kingfisher Airlines, the private sector airline has submitted a revised flight schedule to the Directorate-General of Civil Aviation (DGCA), drawn up with a fleet of 28 aircraft. However, sources maintain that a question mark hangs on whether funds will actually be released.
Confirming receipt of the airline's revised flight schedule, the Director-General, Mr E.K. Bharat Bhushan, said it is being examined. The airline should be in a position to operate about 175 daily flights, down from over 400 it operated earlier.
Though there were reports that State Bank of India and Punjab National Bank had thrown the troubled airline a lifeline, this could not be confirmed.
A consortium of banks, led by State Bank of India, is looking to provide additional funds to the airline, despite some banks declaring it a non-performing asset. This despite the Deputy Governor, Reserve Bank of India, Dr K.C. Chakrabarty, telling newspersons in Bangalore that banks were free to lend more money to Kingfisher Airlines if they felt the loans could be recovered.
Direct fuel import
Meanwhile, in another development that could bring cheer to the airline and the sector, the Director-General of Foreign Trade has issued a notification allowing airlines to directly import aviation turbine fuel. Approval for import will be given on a case-to-case basis and airlines will have to apply afresh to import ATF. Currently, only State Trading Enterprises of the Government are allowed to import ATF. Kingfisher had applied for permission to import ATF directly, pointing out that such a move would help it cut down operating costs.
While a figure on the quantum of additional funds being made available to the airline was not immediately available, at a consortium meeting held last week, banks considered two options.
The first option is that the 10 banks in whose books the Kingfisher account is still a performing asset would extend short-term loans of Rs 20 crore each so that the airline's operations can continue for a couple of months. This move is intended to give the promoter breathing space to bring in equity capital via foreign direct investment.
The second option is that banks want the risk arising from fresh loan exposure to be spread evenly so that each member of the lenders' consortium takes no more than a Rs 10-12-crore exposure. The cash-strapped airline has debt of about Rs 7,000 crore and reported a 75 per cent increase in its net loss, at Rs 444 crore, for the quarter ended December 2011.
Meanwhile, questions are being raised in certain quarters about providing additional funds to the airline, with some saying that banks were under intense pressure to provide the funds.
(With inputs from Mumbai and Bangalore Bureaus)