Banks continue to extend loans to airlines

Despite sharp erosion in the net worth of airline companies due to losses in the recent past, banks and financial institutions have decided to sanction loans to some of them including Jet Airways and Kingfisher Airlines, while some of the companies in this sector are still waiting.
According to senior officials of a public sector bank, full service carrier Jet Airways has been sanctioned a loan worth Rs 700-800 crore from a consortium of public sector banks that includes Punjab National Bank and State Bank of India.
Kingfisher Airlines, which merged with low-cost carrier Air Deccan last year, is learnt to be in the final round of discussion with another group of banks, which includes Bank of Baroda and Indian Overseas Bank, for loans worth Rs 600-800 crore.
“Jet has been looking for a loan of around $300 million (Rs 1,500 crore). It has already been given $100 million and will get a part of the other chunk before the end of this financial year,” said a market analyst on condition of anonymity.
Jet executives refused to comment on the issue. Responding to an email, however, Kingfisher Chairman Vijay Mallya denied having any talks with Bank of Baroda or a consortium of banks, but said that they are getting credit from several banks.
“We have no discussion with Bank of Baroda. KFA does not have a bankers’ consortium. All I can confirm is that multiple banks have provided sufficient lines of credit to KFA, which is meeting all its obligations including payments of overdues to oil marketing companies (two instalments paid on time already) and to Airports Authority of India (three instalments paid on time already).”
According to a senior banker, the problem in taking fresh exposures with aviation companies is erosion of networth.
24/12/08 Arun Kumar & Anirban Chowdhury/Business Standard

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Categories: Indian Aviation- In General Dec 2008