Reuters/Mumbai
The civil aviation minister sought to cool a crisis over debt-hobbled Kingfisher Airlines yesterday as investors bailed out, alarmed by scores of flight cancellations and reports that its leasing firms wanted their planes back.
Kingfisher has climbed to become India’s No. 2 private carrier since it began operations in the heady days of 2005 as the economy was booming and forecasts for passenger growth reached for the skies.
But it has become one of the main casualties of high fuel costs and a fierce price war between a handful of airlines which, between them, have ordered hundreds of aircraft for delivery over the next decade in a long punt on the future.
The Centre for Asia Pacific Aviation (CAPA) has forecast a record $2.5bn-$3bn loss for Indian airlines for the year ending March 2012, with state-run Air India alone likely to account for more than half of it.
As shares in Kingfisher slumped 18% yesterday to their lowest level since it was launched by the flamboyant liquor baron Vijay Mallya, Civil Aviation Minister Vayalar Ravi said he would approach the finance minister to seek emergency bank assistance for the cash-strapped company.
Shares in India’s top two lenders, State Bank of India and ICICI Bank, which each hold more than 5% of Kingfisher, fell sharply on concern that their loans would turn sour.
The country’s main opposition party made it clear yesterday that it would oppose a state bailout for Kingfisher, which means the pressure will remain on Mallya’s United Breweries (Holdings) to keep the airline in business.
“I think it will be difficult for the UB Group to bail them out again and again,” said an aviation analyst at a domestic brokerage, who asked not to be named.
“The airline needs fresh funds and there will be a question mark on its survival if it is unable to raise the funds.”
Group firm United Breweries has pledged its shares with lenders including ICICI Bank as collateral against loans.
Kingfisher chief executive officer Sanjay Aggarwal sought to shore up confidence in the company yesterday after it had cancelled scores of flights daily since Sunday in an effort to cut capacity and minimise costs, leaving passengers stranded just as the country’s travel season enters its peak period.
“There is no doubt in our mind as a management team or Dr Mallya as a promoter of the airline, or the UB Group, about the credibility or the future of the airline,” he told television channel NDTV Profit.
The Economic Times reported that some companies that had lent aircraft to Kingfisher planned to take them back, and in Europe two industry sources said on Thursday that the carrier was set to cancel orders for two A340 Airbus aircraft.