Kingfisher in stake sale talks with Etihad

Agencies/New Delhi

Kingfisher Airlines said yesterday it was in talks with Abu Dhabi’s Etihad Airways and other investors about taking a stake in the grounded and indebted carrier.

Kingfisher shares rose near to their daily limit of 5% after a local newspaper reported that Etihad was close to buying a 48% stake in the carrier, controlled by its flamboyant chairman Vijay Mallya, for a little over Rs30bn ($550mn).

“We would like to clarify that the company is in discussion with various investors, including Etihad Airways, for equity investments in the company,” Kingfisher said in a statement.

It gave no further details as to the possible size of the stake or the price anyone would pay. Etihad Airways declined comment.

A formal announcement of a deal could come around December 18, the birthday of Mallya, according to the Mumbai Mirror, a tabloid known mainly for coverage of local news. It did not say how it got the information.

Kingfisher has been trying for more than a year to find an investor, with no foreign carrier publicly expressing an interest in taking a stake.

Battling stiff competition and high operating costs, Indian carriers have been in talks to sell minority stakes to foreign airlines. Etihad has been eyeing a stake in Jet Airways, India’s largest airline by total passengers carried, a source said recently.

Etihad chief executive James Hogan told an Indian television channel last week that it was in talks in India to add to its foreign holdings, which already include stakes in Virgin Australia, Air Berlin, Air Seychelles and Aer Lingus.

But aviation analysts expressed doubt that the group would be interested in Kingfisher given its debt estimated at $2.5bn by the Centre for Asia Pacific Aviation (CAPA), a Singapore-based consultancy.

“How does it make any financial sense? Why would you buy a company with zero sales and this kind of debt for so much money?” one aviation analyst for a major Mumbai brokerage said.

“Given its debt, without restructuring, it’s very unlikely anybody - a private equity investor or a foreign carrier - would buy into Kingfisher,” another Mumbai aviation analyst said.

“I do not think any foreign airline would be interested in Kingfisher unless promoters infuse money into the company, at least Rs40-50bn,” said Rashesh Shah, an aviation analyst with ICICI Securities, who has suspended coverage of the stock.

Industry expert Rajan Mehra, the India head of US-based private jet operator Universal Aviation, said an Etihad investment in Kingfisher was possible.

But he said the reported price sounded high and Etihad would not want to take on all of Kingfisher’s debt.

Kingfisher’s market value is about $231mn.

“They can get an airline which is in a mess, which can be bought at a reasonable price, and which gives them access to the captive domestic market,” said Mehra, who previously headed Qatar Airways’ India operations.

Abu Dhabi-based Etihad would initially buy a 30% Kingfisher stake in December and a further 18% by next August, the newspaper said.

Kingfisher, once India’s second-largest airline by domestic market share, has struggled to pay staff for much of this year and has not flown since early October due to staff protests and safety concerns.

Kingfisher’s often-volatile shares closed up 4.7%, effectively at their 5% daily limit, at Rs15.60 yesterday. They have more than doubled since hitting an all-time low of Rs7.05 in August.

Airport seizes seven planes

The Mumbai International Airport Ltd (MIAL) has seized seven Kingfisher Airlines aircraft for non-payment of airport dues, officials said yesterday. MIAL has already served two notices to Kingfisher demanding clearance of dues totalling Rs530mn. “Until the long-pending dues are cleared, we will not let them fly these aircraft, which are in our control,” an official said. The dues pertain to parking charges, navigation and other services offered by MIAL in the normal course of airline operations. The details of the type of aircraft that have been seized were not immediately available. “Since they have not responded to the dues notice, we have taken control of their aircraft. They will not be permitted to fly till the full dues are cleared,” the official said.