Logistics

Kingfisher Air to sell Mumbai corporate office

Our Bureaus Bangalore/Mumbai | Updated on September 29, 2011 Published on September 28, 2011

Kingfisher Airlines’ corporate office in Mumbai. — Photo: Shashi Ashiwal   -  Business Line



The cash-strapped Kingfisher Airlines has decided to put its corporate office in Mumbai on the block while it plans to raise about Rs 2,000 crore through a rights issue.

“We have moved into a new building in Mumbai. The existing office is now redundant to our needs, so we will obviously look to sell it. Any initiative that we can take to reduce our debt is going to be pursued,” Mr Vijay Mallya, Chairman of the airline, told newspersons on Wednesday after emerging out of the company's annual general meeting.

According to real estate analysts, the commercial building, located on the Western Express Highway, could fetch about Rs 20,000 per sq ft.

The company also plans to come out with Rs 2,000-crore rights issue, which was unanimously approved by shareholders, informed Mr Mallya. The rights issue could be launched in addition to a $250-300 million GDR issue, which has already been approved by the company shareholders.

“GDR could not be launched due to various external environmental factors such as the high crude oil price regime. But there are always opportunities that show up and we are examining all options available to us including the rights issue,” he said.

The company is looking at initiatives to improve revenues and reduce losses. Kingfisher Airlines was working with the consortium of banks, which hold 23 per cent stake in the company, to reduce interest cost, said Mr Mallya.

The airline implemented a debt recast, wherein bank loans over Rs 1,300 crore and funds from promoters of about Rs 745 crore were converted into share capital. The interest rate on the recast loans was also lowered to 11 per cent and the period of payment was extended to nine years.

Reducing debt and interest cost

Earlier, Mr Mallya pointed out some of the proposed initiatives to reduce loans include sale and lease-back of some aircraft and other assets, and converting part of its rupee loans into low-cost forex loans based on existing forex cash flows. In order to attain operational efficiency, Mr Mallya said the company was reconfiguring its aircraft, which will result in “10 per cent capacity addition with minimal incremental cost”. According to a press statement from the company, the airline's Airbus aircraft will now incremental seats in economy.

Unprofitable routes would be cut down, he added. Pointing out that it was all about making optimum use of aircraft, he said the company was awaiting approval for several overseas routes that it could fly at night, which would improve the aircraft utilisation.

On Airbus A380 acquisition, Mr Mallya said, “A380s are some years out. Right now, the focus is on making sure that we drive profitability through our domestic and international network.”

Published on September 28, 2011
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