The king of good times is facing his worst turbulence ever. Flight cancellations, exodus of pilots, and near empty coffers make for a very uncertain future.
But the Kingfisher Airlines management is putting up a brave front, hoping that the Manmohan Singh Government will manage to pull it back from the brink of impending closure.
When the airline decided to close down its low-cost Kingfisher Red, stating it would rather focus on the full-service carrier, it might have been a sign of bravado.
At that time, Mr Vijay Mallya, Chairman of the UB Group, which runs Kingfisher Airlines, pointed out that the full-service segment resulted in far better yields for the company. He also said the company would pursue any activity that would help it to reduce its debt burden.
The cash-strapped airline has debt of over Rs 6,000 crore. A 13-bank consortium has a total exposure of close to Rs 7,000 crore, of which about Rs 1,300 crore were converted into equity in a debt recast exercise last fiscal. Consequently, the banks now hold 23.4 per cent stake in the company.
Easier terms on Fuel?
The Government ruled out any direct help for Kingfisher, but asking banks to help the debt-laden airline could be seen as indirect bailout.
However, on Friday, the Union Minister of Civil Aviation, Mr Vayalar Ravi, said that he would speak to the Finance Minister, asking him to request banks to bail out the beleaguered airline. On Saturday, banks decided not offer the company a bailout package.
The Civil Aviation Ministry has also said that it will consult the Ministry of Petroleum and Natural Gas to see whether oil companies can ease the stringent commercial terms at which aviation turbine fuel is provided to the airline.
In a recent interview to Business Line , the CFO of UB Group, Mr Ravi Nedungadi, pointed out that the price of crude oil was about $80 per barrel at the time of the first recast, and is now hovering at $100 per barrel. The rupee also has eased to about Rs 50 per dollar from Rs 40 earlier, he added.
It may also be recalled that the Group of Ministers did manage to convince the Petroleum Ministry to ask the oil companies twice to extend oil on credit for three months. Kingfisher gets supply from the oil companies on a ‘cash-and-carry' basis.
Vacant slots
Now, one of the outcomes of the current crisis in Kingfisher is that the aviation regulator, the Directorate General of Civil Aviation (DGCA), brought out a new slot policy for all the airlines. Slot means assured time for aircraft movement and reserved parking at airports around the country.
The regulator has now decided that if the airline company has no aircraft to operate, it cannot keep the slot given for flights by the said aircraft.
It means a good number of the slots that have already been allocated will be vacant at busy airports such as Delhi and Mumbai. Any airline in a position to operate flights to these airports can apply for the slot vacated.
On an immediate basis, the company would seek an additional Rs 300 crore as funded limit and a similar amount to secure letters of credit and bank guarantees from the consortium of banks, a top company official told Business Line .
What remains to be seen is how the airline proposes to tide over its current crisis and also convince the core committee of bankers, which is expected to meet on Thursday again, to take a call on future funding.