Making a case for bailout

Mumbai: Pressure from lenders or potential investors may have forced Kingfisher Airlines’ Vijay Mallya and Jet Airways’ Naresh Goyal to collaborate.
Industry sources said that Mallya has been raising money from ICICI Bank and State Bank of India. “With stocks plummeting, the banks may have made margin calls to top up the collateral. But how much can you top up?” said an airline official.
Both Mallya and Goyal have been trying to raise $400 million each from equity investors without much luck. The industry grapevine is that Goyal has raised money from a high-profile domestic investor through private share sales.
“Mallya has taken large debt. While he has built a great product, it has no relation with costs and fare. All the chopping and changing he has done (buying Deccan, re-branding) doesn’t come cheap. Similarly, international operations is bleeding Jet as foreign airlines give it a run for its money,” said a senior official.
Airlines have also been facing pressure from the oil companies on their dues on aviation turbine fuel (ATF), which are mounting beyond the 40-day credit period. Thanks to some lobbying and the shape of airlines, the oil companies have been going easy on airlines in collecting the dues.
Domestic airlines are projected to tot up losses of $2 billion in the current fiscal; both Kingfisher and Jet are estimated to be losing Rs 10 crore a day each though losses would have come down marginally as crude prices have fallen sharply.
“They are both bleeding and cannot sustain it; nor can they hope to raise money in the domestic or global markets for sometime. So, there’s a clear compulsion to cut costs,’’ said Cyruz Guzder, CEO, AFL Logistics and an aviation expert.
18/10/08 Ranju Sarkar/Business Standard

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Categories: Jet Airways Oct 2008, Kingfisher Oct 2008