A photograph taken on October 20 shows a customer service representative standing behind the closed window of a Kingfisher Airlines booking counter at the International airport in New Delhi.

 

Agencies/New Delhi

Grounded and debt-laden Kingfisher Airlines, which has been desperately seeking investment from foreign carriers, said yesterday it plans to resume operations in a “phased manner”

The airline, owned by liquor baron Vijay Mallya, has not flown since it suspended operations in October when it was hit by a crippling strike by employees over non-payment of salaries.

The carrier has had its licence suspended by the aviation regulator until it comes up with a “viable” revival plan and is facing eviction from Mumbai airport for non-payment of parking and navigation charges.

“We will restart in a phased manner and will provide funding ourselves,” said airline spokesman Prakash Mirpuri, who did not specify a time frame.

The company has also come up with “a full recapitalisation plan which will be further discussed with a small designated group of bankers,” Mirpuri said. “We have not asked the banks for any support.”

A senior executive of the state-run State Bank of India, Shyamal Acharya, said Mallya was ready to inject Rs4.25bn ($78mn) of his own money into the airline to get it flying again, the Press Trust of India reported.

The airline’s lenders have set up a six-member core group, including State Bank of India, to keep track of Kingfisher’s revival plans, Acharya said.

Kingfisher said last week it was in talks with “with various investors, including (Abu Dhabi-based) Etihad Airways, for equity investments in the company.”

But Indian aviation analysts expressed doubt whether Etihad would be interested in Bangalore-based Kingfisher given its debt load estimated at $2.5bn by the consultancy firm Centre for Asia Pacific Aviation (CAPA).

However, a government official said Etihad, seeking to widen operations in India and other Asian markets, is in the final stages of talks to buy part of either Kingfisher or rival Jet Airways.

A deal, which the official said could be announced by next week, would be the first since the government relaxed ownership rules in September to allow foreign airlines to invest up to 49% in a domestic carrier.

“Etihad has not yet decided. They are talking to both,” said the official, who has knowledge of the talks but declined to be named as the negotiations are confidential.

The decision is now with the board of Etihad and Abu Dhabi’s state-owned investment fund Mubadala, said one Dubai-based source who did not want to be identified as discussions were private.

Indian financial firm Edelweiss is advising Kingfisher. The firm and the airline’s management team have met with Etihad several times over the last few days.

Buying into Jet is seen as more lucrative for Etihad as the two carriers already have a code-sharing agreement and could target the market share of state-owned Air India and Dubai-based Emirates Airline, which dominates routes between India and the Middle East.

But a stake in Kingfisher would be cheaper.

Jet Airways was set to sign a deal with Etihad valued at around $440mn within six months, a source had confirmed in November.

The Dubai-based source said news leaked on the Jet-Etihad partnership plans, which shot up the stock price, causing the Abu Dhabi carrier to reconsider.

“The deal was almost done with Jet when it was leaked and this upset Etihad,” said the source.

Indian carriers are beset by stiff competition and high operating costs and have been in talks to sell minority stakes to foreign operators.

Shares in Jet Airways Ltd, the No2 Indian carrier, closed 2.4% higher yesterday, after rising as much as 4.7% to a nearly two-year high, on hopes that Etihad would strike a deal with it.