Kingfisher said to be in talks with 2 foreign carriers for rescue package

Written by Press Trust of India | London/New Delhi | Updated: Feb 28 2012, 08:34am hrs
Kingfisher Airlines is in talks with two foreign carriers, including International Airlines Group (IAG) the owner of British Airways and Iberia for a potential rescue package, a report by The Times said. This could pave the way for IAG to take a minority stake in the troubled Indian airline, the report said.

Vijay Mallya, who controls 58% of Kingfisher, told the daily that he had secured provisional approval from the government for a change in the law that would ease restrictions on foreign ownership of airlines. He claimed that the foreign carriers, which he refused to identify, stood ready to invest as soon as the change was announced possibly within days. It would allow overseas airlines to own up to 49% of an Indian airline for the first time.

The report quoting a financial source in Mumbai named one of the airlines involved as IAG. Etihad, the UAE-based airline, is also believed to have discussed a tie-up, which would involve the foreign groups providing equity in exchange for a minority stake.

Kingfisher which has debts of R6,300 crore (810 million), needs an immediate cash injection of up to 160 million to remain solvent, the report said.

IAG, according to the report, welcomed the possibility of a liberalisation of Indias aviation industry, but said that it was too early to speculate about IAGs interest in any Indian airline at this stage.

Etihad said, We talk regularly and frequently to many airlines about issues and opportunities.

Some observers said Kingfishers financial condition was so poor that IAG and Etihad could be reluctant to get involved. In a further sign of the financial strain on his business, Mallya said he was considering the sale of a stake in Whyte & Mackay as part of a drive to cut his groups $4 billion debt.

Mallya said that consolidated USL, his spirits holding group which has debts of $1.68 billion, was considering the sale of a 49% stake in Whyte & Mackay, the Glasgow-based whisky maker which he bought in 2007 for $1.2 billion. The report also quoted Ravi Negundadi, the UB Group CFO, as denying the cash would be used to pay off any of Kingfishers debt.

If the government decides that Kingfisher is irrelevant, that connectivity is irrelevant and therefore to let it shut down, then that is the worst that can happen, Mallya said, insisting that he would never voluntarily pursue bankruptcy.

I have never asked the government for a rupee...(but) the airports are government-owned. The fuel supplier is government-owned. The banks are government-owned. Its in their hands. It is the governments decision on foreign investment that holds the key to the groups survival, he said, adding, I have the ability to raise funds from my friends and associates.

FII holdings in Kingfisher dip sharply

Overseas investors are fleeing Kingfisher Airlines as their total holdings in the cash-strapped airline came down to just 0.5% in the 2011 December quarter from over 2% in the previous three months, according to data available with bourses.

An analysis of shareholding patterns of three listed airlines showed that foreign institutional investors (FIIs) have reduced their stakes in Kingfisher and SpiceJet, while hiking their holdings in Jet Airways in the three months to December 2011.

FIIs have been trimming their holdings over the past few quarters in Kingfisher Airlines, which is now grappling with a severe cash crunch amid large-scale flight cancellations.

FII holdings in the Vijay Mallya-led Kingfisher has come down to 0.5% at the end of the December quarter from 2.11% in the preceding three months. Their stake stood at 3.02% in June 2011 quarter.

Similar trends were seen in rival carrier SpiceJet where the holdings of foreign investors slumped to 3.81% in the December quarter from 6.17% in the July-September period.

However, Jet Airways the countrys largest carrier in terms of passengers carried witnessed an increase in FII stake at 5.42%, compared with 4.67% in the three months to September.

Besides, SpiceJet saw a huge fall in its FII holding from 6.17% in the July-September quarter to 3.81% in the three months through December. However, Jet Airways witnessed an increase in FII stake at 5.42% compared with 4.67% in the three months to September.