Lenders to Kingfisher Airlines have asked chairman Vijay Mallya for a presentation on the airline's strategy going forward. Mr. Mallya has until the end of September to submit his presentation, and the lenders have put off any further lending until then.
Lenders are open to selling the airline's non-core assets to recover their dues, and the final decision on this will be taken after the presentation, sources said.
As many as 17 banks, led by State Bank of India, have an exposure of more than Rs 7,000 crore in advances to the carrier, which has not serviced its debt since January and has not paid salaries since March 2012, forcing its pilots and engineers to strike several times in the past five months.
Apart from this huge debt, the carrier has also an accumulated loss of more than Rs 8,000 crore, and hasn't posted a profit since it was founded in May 2005.
According to its 2011-12 annual report, the airline's net loss more than doubled to Rs 2,328 crore in 2011-12 from Rs 1,027 crore in the previous year. Its total long-term borrowings stood at Rs 5,695 crore as on March 31, 2012, while short-term borrowings rose to Rs 2,335 crore at the end of 2011-12.
For these loans, the airline has used as security all its movable assets, trademarks, 'goodwill' of the company and other receivables and a mortgage on Kingfisher House.
The meeting assumes significance in the wake of last week's report by the industry analyst Centre for Asia Pacific Aviation (CAPA), which cast doubts on the continuation of operations of the airline if it is unable to infuse at $600 million immediately.
"Kingfisher faces the prospect of an operational shutdown, possibly temporarily, to allow it to restructure and re-organise. A viable turnaround is unrealistic without a significant recapitalisation of the airline," Capa had said. According to the agency, restructuring of the airline will require the banks to take a significant hit as they have a huge exposure to the ailing carrier.
With inputs from the Press Trust of India
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