By IANS,
Mumbai : The government owned State Bank of India (SBI) Monday said its officials will meet Kingfisher Airlines about its massive bank debts with SBI.
“The sense we have from him (Vijay Mallya) is that he is willing to do everything possible to keep the Kingfisher brand alive, including big sacrifices,” Pratip Chaudhuri, SBI chairman, said in a press interaction on the bank’s decision to cut its benchmark prime lending rate.
The bank has reduced its prime lending rate by 25 basis points from the current 14.75 percent per annum to 14.50 percent per annum, effective Sep 27, 2012.
The development comes after the government allowed foreign carriers to invest in domestic airlines. Mallya has been lobbying for the government’s foreign direct investment (FDI) measure as he expects to recapitalise the debt-ridden airline which has loans worth Rs.8,000 crore.
Chaudhuri, whose bank has an exposure of about Rs.1,500 crore to the airline, said the bank cannot go by promises or projections anymore and needs to know concrete plans for the recapitalisation of the airline.
According to a report by Centre for Asia Pacific Aviation (CAPA), Kinghfisher Airlines may have to shut down operations if $600 million cash is not infused in the next two months.
“Kingfisher is able to continue as a result of daily infusions of funding by the promoter. However, with mounting losses the situation is unsustainable. In Q1 (first quarter, 2012-13) the promoters invested $133.9 million, but this barely allows the airline to survive,” CAPA said in their Aug 24 report on the Indian airline industry’s performance in the first quarter of the current fiscal.
The advisory company also said that a restructuring of the airline will require banks to take a significant hit as they have huge exposure to bad debt given to the carrier.
The airline also faces frequent labour unrest with different groups of employees resorting to flash strikes for payment of salaries and other reimbursements.
The airline had the lowest market share in August, which stood at 3.2 percent.
The report estimated Kingfisher Airlines had suffered a total loss of $220-$260 million in 2012-13. The company reported a net loss of Rs.650.78 crore ($117 million) for the quarter ended June 30, 2012.