Airlines’ fate depends on debt-restructuring plan

Mumbai: As Indian air carriers are awaiting a debt restructuring process ahead of their respective fund raising programmes, industry experts say, even a marginal relaxation like resetting the rate of interest and extending the moratorium period will be beneficial to the industry, saddled with a collective debt of over Rs 60,000 crore.
However, on the flip side, if the restructuring does not happen, the risk will continue to negatively impact the balance sheets of airline operators.
The RBI has asked banks to work out a special concessional package for the crisis-ridden aviation sector, in response to which the lenders said they will look into the problems on a case-to-case basis. Most large banks have an exposure to national carrier Air India with around Rs 40,000 crore debt (which includes Rs 18,000 towards working capital and Rs 20,000 crore extended for aircraft purchase), Kingfisher Airlines (Rs 6,000 crore) and Jet Airways (Rs 14,000 crore).
Ravi Nedungadi, CFO, UB Group told FE, “We are working with a consortium of banks to restructure our debt but as of now, I cannot divulge any details until a final decision is arrived at.” Vijay Mallya, UB Group chairman, that runs Kingfisher Airlines had recently told shareholders that in the restructuring process, there will be an interest rate reduction to an average of 11%.
26/10/10 Shaheen Mansuri/Financial Express

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Categories: Indian Aviation- In General Oct 2010