Kingfisher Airlines on Sunday said its consortium of bankers had agreed to provide an interim funding until the company got an equity partner, even as the airline continued to cancel over 30 flights for the second day and the Directorate General of Civil Aviation threatened action.
When asked how the airline would tackle the grim situation, A K Ravi Nedungadi, the president of UB Group (which owns the airline) told Business Standard: “Banks have agreed to provide interim funding.” He, however, refused to divulge any detail.
Even while the airline was forced to officially slash over 30 flights for the second day, travel agents said the number was much higher. This sudden step has now drawn the wrath of the Directorate General of Civil Aviation which has sought an explanation for cancelling flights without intimation from the airline.
“The airline has not informed us. We are trying to assess the magnitude of the problem,” Director General Bharat Bhushan said, adding that he had written to all other airlines not to raise fares. Bhushan said he would discuss with his officers on Sunday evening to decide on the future course of action.
Two months ago, DGCA had carried out a detailed financial audit of the airline which revealed its grim condition. Sources said DGCA had been hamstrung and was unlikely to take any drastic action against the airline on its own.
A 13-bank consortium led by State Bank of India had earlier said that it would not further lend to Kingfisher Airlines till UB Group infused equity first.
Investment bankers said Kingfisher Airlines would require extension of working capital limits of at least Rs 300 crore to start normal operations.
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The airline, which is gasping under the debt of close to Rs 7,000 crore, has been paying as much as Rs 1,300 crore as interest on an annualised basis. That is more than its market capitalisation.
The airline had said in a statement late Saturday night that the consortium of banks had accepted, in principle, the viability study prepared by SBI Capital Markets and independent consultants. “Our request for additional working capital has been acknowledged by the consortium and is subject to individual bank approvals,” the statement had said.