Banks shut door as airlines run out of collateral

Mumbai: There is a reason why private airlines such as Jet Airways and Kingfisher Airlines are looking outwards to raise funds.
The two companies have been denied loans from private banks in the domestic market and this may remain so for the next six months.
DNA has learnt from sources that private banks, who are major lenders to aviation players, have stopped providing working loans to these airlines, citing lack of collateral and irregular cash inflow as reasons.
"We have suspended long-term loans to airlines for the next six months," said a senior banker with Axis Bank. The bank last provided a loan of Rs 30-40 crore to GoAir, six months ago. Prior to that, a year ago, Axis Bank had sanctioned a loan of over Rs 50 crore to Kingfisher Airlines.
Private banks such as ICICI, that have traditionally lent to aviation players, have also decided not to increase their exposure to the sector. However, sources within the bank have said that they will provide loans to airlines after a few months.
HDFC, on the other hand, said they have not made allocations for the aviation sector; "We are averse to it," said an official in HDFC's corporate funding department, who did not want to be named.
The Axis Bank official said lack of collateral was the reason for shying away from lending to airlines.
11/12/09 Ramiya Bhas/Daily News & Analysis

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Categories: Foreign Dec 2009, Jet Airways Dec 2009, Kingfisher Dec 2009