Bloomberg News

Billionaire Mallya’s Kingfisher Slumps, Seeks India’s Help

November 25, 2011

(Updates with closing share price in second paragraph)

Nov. 11 (Bloomberg) -- Kingfisher Airlines Ltd., controlled by billionaire Vijay Mallya, slumped in Mumbai trading after it cut flights and approached India’s government for help as it works to restructure debt and pare losses.

The airline, India’s second-biggest by market share, fell 9.5 percent to 19.65 rupees at close of trading in the city. The stock earlier plunged 19 percent, the most in three years. United Breweries (Holdings) Ltd., Mallya’s holding company and Bangalore-based Kingfisher’s biggest shareholder, fell 8.7 percent.

India’s finance ministry may ask banks to help Kingfisher restructure its debt after the carrier sought the government’s assistance, Civil Aviation Minister Vayalar Ravi said in New Delhi today. Kingfisher has scrapped 167 flights since Nov. 8 and some of its lessors plan to reclaim aircraft because of overdue fees, the Economic Times newspaper reported, without saying where it got the information.

“Unless there is an infusion of money at this point, I don’t really see how it’s going to survive,” said Rishikesha Krishnan, a professor of corporate strategy at the Indian Institute of Management, Bangalore, who has written papers about Indian aviation. “That infusion of money has to come from Mallya. I can’t see anybody else who’s going to put money in.”

New Planes

Kingfisher has posted losses totaling more than 47 billion rupees ($935 million) over the last three years as it added new planes and competed against state-owned Air India Ltd. Earlier this year, it won as much as 12.1 billion rupees of new loans after banks agreed to convert 13 billion rupees of existing debt into preferred shares.

Jet Airways (India) Ltd., the nation’s biggest, today separately reported a wider-than-estimated loss of 7.14 billion rupees for the quarter ended Sept. 30. Revenue rose 7 percent to 32.9 billion rupees, Jet Airways said in a statement.

Kingfisher will report quarterly earnings on Nov. 14, according to the BSE India website.

The airline isn’t operating 36 percent of flights it has scheduled for the winter season, E.K. Bharat Bhushan, Director General of Civil Aviation, said in New Delhi. The slots at airports that Kingfisher isn’t using will be given to other carriers, he said, without elaborating.

Prakash Mirpuri, a Kingfisher spokesman, said in a mobile- phone text message that he is on medical leave, and referred calls to Kingfisher’s external public relations agency. Kingfisher Chief Executive Officer Sanjay Aggarwal didn’t answer text messages and four calls to his mobile phone. Mobile phones of Mallya, the carrier’s chairman and managing director, were switched off.

Jet, SpiceJet

Shares of Jet Airways and SpiceJet Ltd., India’s only listed discount carrier, gained in Mumbai after Bhushan’s comments. Jet Airways rose 2.3 percent, erasing previous losses, while SpiceJet climbed 3.6 percent.

Kingfisher has about $1.5 billion of debt and a debt-to- asset ratio of 82, according to data compiled by Bloomberg. Jet Airways has a debt-to-asset ratio of 67, while SpiceJet has a ratio of 7.7.

Kingfisher and SpiceJet have tumbled 70 percent this year, while Jet Airways has dropped 65 percent as they struggle to turn surging travel demand into profit. Jet has posted losses for at least four years. The number of domestic passengers in India rose 18.6 percent this year through August to 39.6 million, according to the Director General of Civil Aviation.

Personal Guarantees

Mallya, 55, doubled personal guarantees against the carrier’s debt to 61.7 billion rupees in the year ended March, according to the airline’s annual report. The carrier paid him 508.7 million rupees for loan assurances, according to the report, published in September.

United Breweries also more than doubled its debt guarantees to 168.5 billion rupees. The company, which owns 40 percent of Kingfisher, has dropped 71 percent this year.

Mallya formed Kingfisher Airlines in 2005, naming it after the beer UB Group brews under the Kingfisher brand. He handpicked each of the flight attendants and instructed them to treat passengers as “guests in my own home,” according to a video shown on Kingfisher flights.

In 2008, Kingfisher completed a merger with Deccan Aviation Ltd., which operated India’s first low-cost airline, Air Deccan. Kingfisher had a fleet of 66 planes ranging from Avions De Transport Regional turboprops to Airbus SAS A330s as of March 31, according to its annual report.

Airbus A380

The carrier has also ordered five Airbus A380 planes, which it expects to start taking delivery from 2016.

Mallya inherited the UB Group from his father in 1983 at the age of 27. He has since built United Breweries Ltd. into India’s biggest brewer and United Spirits Ltd. acquired brands including Whyte & Mackay.

The billionaire also has a stake in a Formula One team and owns Indian Premier League cricket team Royal Challengers Bangalore. In October, he sold a 42.5 percent stake in his Formula One team to India’s Sahara Group for $100 million.

Mallya had a net worth of $1.1 billion, and was ranked 49th among India’s billionaires, according to Forbes magazine.

--Editors: Vipin Nair, Subramaniam Sharma.

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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