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'Kingfisher not like AI, no direct financial help'

Last updated on: January 11, 2012 12:03 IST

'Kingfisher not like AI, no direct financial help'

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BS Reporters in Mumbai/Delhi

New civil aviation minister Ajit Singh has ruled out any government help for loss-making Kingfisher Airlines.

"Supporting (state-owned) Air India is government's responsibility," he told Business Standard, but the same yardstick couldn't apply for private airlines.

"Private carriers will have to convince their bankers that they have a viable business plan and ask for help from the bankers.

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"The government cannot and will not give them working capital to operate the airline," Singh had told this paper in an interview earlier.

This comes in the wake of Kingfishers chairman Vijay Mallya's letter seeking government support.

Mallya also wrote to frequent flyers of the airlines seeking their support in the troubled times.

However, Ajit Singh's ministry is to ask the Airports Authority of India to grant Kingfisher additional time to pay its dues, amounting to Rs 240 crore (Rs 2.4 billion).

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Similarly, it is to write to the petroleum ministry to consider Kingfisher's request for a 15-day credit for aviation turbine fuel purchase from Hindustan Petroleum Corporation.

Singh will also be convening a meeting of state governments to put forth the aviation sector demands for reduction in sales tax and octroi on aviation fuel.

In his letter to Singh, Mallya painted a grim picture of the airline having to downsize operations significantly if it did not get funding quickly.

Without a temporary overdraft to meet working capital requirements, said Mallya, the airline would not be able to maintain its normal schedule.

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Image: Ajit Singh.


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He also requested a 15-day credit period for fuel purchase.

"Our lessors have gone to court in London against non-payment of lease rentals. If we don't clear dues, our aircraft will be grounded,'' Mallya wrote.

The airline is in financial crisis even after It had restructured Rs 7,000 crore (Rs 70 billion) of debt with banks' approval.

The package included conversion of about 30 per cent of the debt by banks into capital and of a loan of Rs 735 crore (Rs 7.35 billion) from parent company UB Holdings into equity.

The airline has defaulted on payments to oil marketing companies and airport operators, among others.

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HPCL recently stopped fuel supply to it for a few hours after the dues touched Rs 650 crore (Rs 6.5 billion), of which Rs 170 crore (Rs 1.7 billion) was not covered by any guarantee.

The airline was also recently threatened by GMR, which operates the Delhi and Hyderabad airports, that it would put it on a cash-and-carry system, after the airline's dues touched Rs 90 crore or Rs 900 million (Rs 68 crore or Rs 680 million for Delhi and Rs 22 crore or Rs 220 million for Hyderabad).

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Tags: HPCL , GMR , Delhi

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Kingfisher is the only listed air carrier to have not turned profitable in the last financial year.

It ended 2010-11 with a loss of Rs 1,027 crore (Rs 10.27 billion).

The airline also increased its losses in the first quarter of the current financial year to Rs 263 crore (Rs 2.63 billion), from Rs 187 crore (Rs 1.87 billion) during the same period last year.

 


Image: Vijay Mallya.

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