Kingfisher Woes Could Affect Funding for Other Airlines

Monday, 18th February 2013 at 06:47am

Current and future airlines in India are at risk of losing their chances of getting assistance from lenders and leasers after Kingfisher Airlines, the grounded erstwhile second-largest carrier, refused to return its planes to its lessors after it failed to settle its payment obligations.

The troubled airline owed an estimated $2.5 billion to its lenders, lessors, and even to its employees. The debt was accumulated over the years of unprofitable operations since its started flying in 2005.

According to Wolfgang Driese, Germany's DVB Bank CEO, the Indian government should issue an order to the beleaguered airline to show its assets which can be reacquired by its lenders and other entities to whom the airline owed its debt.

He added that any airline companies or airline start-ups in the country will be losing their chances to finance their fleet acquisition in the future.

The German bank has already filed a case against the airline and India's Directorate General of Civil Aviation (DGCA) for their failure to deregister a couple of planes in the bank's favor.

He further warned that his bank will no longer involve in any financing business with Indian companies should they fail to recover their aircraft they lent to Kingfisher. This move will likely send a message to other banks and lenders to reconsider their involvement with other Indian companies in the future.

The pressure runs high on Indian aviation authorities to quell the possibility of the dissolution of Kingfisher, once the country's second largest carrier.

For certain, Kingfisher's dilemma would adversely affect the development of India's aviation industry in general if authorities fail to exert its muscles on the recovery of assets from failing airlines back to its foreign lenders and lessors.

Driese also disclosed that they're not doing business anymore in countries who didn't help them recover their assets from airlines who failed to pay them or went bankrupt.

According to Driese, DGCA should first remove the planes from the registry before they (bank) can legally repossess them and put them back for lease to other companies.

The ailing airline has a total of 33 India-registered aircraft. Last year, before the grounding of some of its planes and the subsequent cancellation of its license, Kingfisher had a total fleet of 64 aircraft.

Now, heavily indebted, Kingfisher is mired in losses and still accumulating by the day. For three months alone, ending 31 December 2012, its losses piled up to Rs7.55 billion while its planes remain grounded.

The airline's rehabilitation plan seems hopeless as there are no foreign companies get interested in its effort to fly again.

Indian airlines have placed orders from two of the world's largest aircraft manufacturers a total of 491 planes, 384 of which from Airbus company, which are yet to be delivered.

By: Pete Lee.