Bloomberg News

Kingfisher Air Reverses 20% Drop After Nearing Loan Agreement

February 21, 2012

Feb. 21 (Bloomberg) -- Kingfisher Airlines Ltd. reversed a 20 percent plunge in Mumbai trading after Bloomberg-UTV said banks are close to granting a 10 billion rupee ($203 million) loan to help the carrier maintain operations.

The airline rose 0.4 percent at the close of trading to 26.75 rupees, after earlier having its biggest intraday decline in more than three years. Calls to Prakash Mirpuri, a company spokesman, went unanswered.

Kingfisher, controlled by billionaire Vijay Mallya, will get funding including 4 billion rupees of working capital, the television channel said, without revealing where it got the information from. The report eased concerns about the Bangalore- based airline’s future after it cut about 15 percent flights because of tax authorities freezing accounts.

“The shares may have gained, but Kingfisher as a brand is losing its value,” said Jagannadham Thunuguntla, chief strategist at New Delhi-based SMC Global Securities Ltd. “They have to get their act together or they might run out of time fast.”

Jet Airways (India) Ltd., the nation’s biggest airline, rose 7.3 percent at the close and discount carrier SpiceJet Ltd. jumped 10 percent, helped by speculation Kingfisher will collapse. The airline has lost money for more than 10 quarters because of rising fuel prices and competition.

Kingfisher expects to win new funding from banks and it is working to regain access to the frozen accounts, E.K. Bharat Bhushan, the head of the Directorate General of Civil Aviation, told reporters today in New Delhi after a meeting with airline Chief Executive Officer Sanjay Aggarwal. The regulator gave the carrier an extension until tomorrow to file a revised schedule.

64 Planes

The carrier is operating less than half of its 64 planes and it has pared services to about 175 flights a day, Bhushan said. There are no concerns about safety standards and the regulator isn’t considering canceling Kingfisher’s operating permit, he said.

The regulator is also checking how many pilots the carrier still has. As many as 50 have quit since Feb. 14, The Times of India newspaper reported today, without saying where it got the information. Kingfisher said yesterday that it has enough flight and cabin crew to operate its schedule.

“Sensational headlines more speculative than fact,” Mallya said on his Twitter feed, without identifying any specific articles. Mallya also controls liquor-maker United Spirits Ltd., a Formula One motor-racing team and owns Indian Premier League cricket team Royal Challengers Bangalore.

Kingfisher, which hasn’t paid salaries on time since December, expects to clear overdue wages by March 20, Bhushan said. The carrier’s flight cuts haven’t so far triggered a jump in ticket prices, he said.

Shares Fall

United Breweries Holdings Ltd., Mallya’s holding company, fell 8.8 percent at the close. United Spirits, which makes McDowell’s No. 1 Whiskey, dropped 2 percent.

Kingfisher has jumped 27 percent this year on speculation the government will help money-losing carriers. Regulatory changes under consideration include letting airlines import fuel to avoid state taxes and ending a bar on them selling stakes to foreign carriers.

The airline said last month that it’s in talks with potential investors including SC Lowy Financial Services. It told lenders it may receive an equity infusion of $250 million by March, three people familiar with the matter said Jan. 17.

Kingfisher is seeking new investment after pledging its brand, office furniture and other assets against $1.3 billion of debts. Its loss in the quarter ended Dec. 31 widened to 4.44 billion rupees from 2.54 billion rupees. SpiceJet and Jet Airways also lost money in the period. Indian airlines will probably lose $2.5 billion in the year ending March, according to CAPA - Centre for Aviation, an industry consultant.

--With assistance from Ameya Karve in Mumbai and Frank Longid in Hong Kong. Editors: Neil Denslow, Vipin V. Nair

To contact the reporter on this story: 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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