Options before Kingfisher Airlines
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Kingfisher Airlines has been facing losses since its inception in 2005. It suspended operations in 2012 due to mounting debts and failure to pay salaries to employees. The airline's market capitalization has declined significantly from its 2008 peak, and over 95% of its founder Dr. Mallya's shares are pledged to lenders. With debts over 7,500 crores and only 11 aircraft remaining, the options for banks are to either restructure loans with Dr. Mallya maintaining control, take over control of the airline, or initiate liquidation proceedings. Foreign investment is another potential option but faces political and operational challenges.
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Options before Kingfisher Airlines
- 2. Facing losses since its inception, in 2005 “A loss-making company acquiring another loss-making company”- Kingfisher acquires Air Deccan Airline suspended from IATA IT Dept. freezes Kingfisher Airline’s bank a/c’s Delay in payment of salaries to staff DGCA suspends SOP of Kingfisher Airlines
- 3. Current market cap- Rs. 1,018 crore Debt- 7,500 crore+ 95% of Dr. Mallya’s shareholdings pledged to lenders
- 4. CRITERIA BEFORE NOW Fleet size 63 11 Market share 2 6 position Loss (Rs.) 1000 Cr. 7000 Cr. Share Price (BSE) 335(2008 peak) 12.60 (Rs.)
- 6. Last recast in January 2011 Options for CDR- 1) Dr. Mallya stays on board + UB Group invests + Banks recast loans 2) Banks take over the Airlines’ control + appoints new board 3) Government mediation after court order(ex. Satyam)
- 7. 49% FDI in civil aviation sector Possible parties- Qatar Airways, Etihad (Abu Dhabi) Political uncertainty Foreign players skeptical Long process (possibly over a year)- by when Kingfisher could possibly be beyond revival May result in distressed sale
- 8. Ultimate option for banks’ consortium to cut losses Options for liquidation- 1) Auction- Company put up for sale (incl. debts) ex. Satyam 2) Sale of individual assets like planes, realty etc. (ex. Lessors have taken back 34 planes, airline left with 15 top operate flights)
- 11. Presenting Members- 1. Abhilash Kumar 2. Disha Agarwal 16. Vishal Garje 27. Kaustubh Kokane 29. Anup Kumbharikar 33. Navya Sindhu 44. Pooja Patil 53. Pranav Atrey Sharma 55. Vinutha Shetty 59. Shripad Telang
Editor's Notes
- IATA- International Air Transport AssociationSOP- Scheduled Operator’s Permit (Flying license)
- Last restructure done in January 2011.Then debt was 8,000 croreConsortium of 18 lenders agreed to-Interest rates cut (down to 11%, saving 500 crore per year)Converting 1400 crore of debt into preference shares (which will be converted into equity shares when the airline lists on the Luxembourg Stock Exchange by selling Global Depositary Receipts- GDRs)KFA expected to raise about $300 mil through GDR issue.
- DGCA Flying license suspensionOneword International Alliance membership on hold
- 15 left to operate flights, of which it owns just 10SBI Chairman PratipChaudhari spoke of giving Kingfisher 2 months to revive, before liquidating the pledged securities. He also quoted that all possible invesros will walk away if they pull the plug now