Money & Banking

Bank unions oppose bailing out Kingfisher Airlines

Anjana Chandramouly K. Giriprakash Bangalore | Updated on November 11, 2011


Bank employee unions on Friday said they are totally opposed to the idea of a possible bailout to the cash-strapped Kingfisher Airlines.

Mr H. Vasant Rai, a top functionary with the All-India Bank Employees Federation (AIBEA), told Business Line that as a policy, the federation is opposed to converting debt into equity.

‘Totally opposed'

“In fact, this was one of the agendas during our strike in August this year. And we are totally opposed to the idea of a bailout. Let banks' procedures take their own course,” he said, in response to the Aviation Minister's call to the Finance Minister to ‘speak to banks on another bailout' to the private carrier.

Another union leader, Mr Ratnakar Shenoy, who represents United Forum of Bank Unions, said it is still not clear how the airline was still incurring losses.

“Such industries are risk-prone. The Government should in fact lend more for the infrastructure as well as development projects,” he said.

Reluctant to lend more

Aviation analysts, too, pointed out that though a bailout is essential to revive the airline, “banks are reluctant to lend more because they have already burnt their fingers”.

Kingfisher Airlines, which had debt of over Rs 6,000 crore in June this year, could have added another Rs 500 crore during the second quarter of this fiscal, according to analyst estimates.

Currently, a 13-bank consortium, including SBI, ICICI Bank, IDBI Bank, Punjab National Bank and Bank of Baroda, holds about 23 per cent stake in the company consequent to the debt restructuring exercise carried out last fiscal.

“As in the case of SpiceJet, the promoter of Kingfisher Airlines too should bring in equity instead of asking banks for loan restructuring,” said an analyst.

The Government, on its part, should come out with long-term solutions rather than ad-hoc, short-term fixes.

“The Government should bring down the high taxes, and also allow a market-driven pricing strategy in the industry,” he added.

A national council member of a travel agents' body opined that the Government should, in fact, fix a price-band for various seat categories within which airline companies should operate.

“The airlines should now look at increasing their ticket prices, though such a move could cause a small dent in demand,” said another analyst with a domestic stock-broking firm.

“At a time when the industry suffers from overcapacity, raising fares could yield better results,” he added.

Published on November 11, 2011

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