Germany's DVB Bank SE said it may repossess two Airbus A320 aircraft from troubled Kingfisher Airlines Ltd if the carrier failed to meet its commitment to the lender in due time.
The cash-strapped carrier, controlled by liquor baron Vijay Mallya, is having trouble making interest payments and paying salaries.
"It is a painful situation, it requires a lot of time and work," Bertrand Grabowski, a member of the board at the bank which oversees the aviation business, told Reuters on Friday. "We have said to Vijay (Mallya) that we cannot continue like this. If we are not paid on due time, we will certainly consider repossession of the aircraft," he said, while declining to comment if there was a certain deadline the bank had set.
“DVB has purportedly said they may repossess two aircraft if we do not pay them as agreed. Kingfisher Airlines fully intends to honour its payment obligations to DVB and other lessors,'' a Kingfisher spokesperson said
Grabowski said the amount of loan DVB has extended to Kingfisher was not significant to its $10-billion aviation portfolio and said the carrier is the only problem that DVB had in its aviation balance sheet.
On the outlook for this year, he said the bank might see slower new loan growth to aviation clients as the risk in the sector is likely to be higher in 2012, due to a tough operating environment for the airlines. DVB is likely to extend only $2 -$2.5 billion in new loans this year compared to $3 billion in 2011, Grabowski said.
Last month, Indian tax officials froze several of Kingfisher's bank accounts for failure to pass on to the government the service taxes that are included in ticket prices. It has until March to pay the service tax dues, the Indian finance ministry said.