Riken Mehta & Shaheen Mansuri
Moneycontrol.com
In the last one year, no other Indian corporate entity had created a buzz like the UB Group-promoted
Kingfisher Airlines (KFA), albeit for all the wrong reasons. From huge debts to internal issues with employees over delayed salary payments to bankers denying further extension of loans to flash strikes by aggrieved pilots, the KFA story is a recipe for disaster.
The situation, which turned grim since last year, has snowballed into a mammoth crisis with bankers issuing an ultimatum to Vijay Mallya, the owner of the carrier, to draw up an equity infusion plan by month-end. Banks have a total exposure of about Rs 7,000 crore to Kingfisher, of which about Rs 4,000 crore is in the form of term loans.
Have a look at the carrier's downfall in the past one year.
Oct 2011: Exactly a year ago, news of KFA joining OneWorld Alliance in 2012 began doing the rounds. OneWorld is a global airline alliance. The move, market experts hoped, would boost the debt-ridden carrier's revenues anywhere between 10 and 15%.
Nov 2011: On one hand, the airline was all set to join a global alliance, on the other, issues relating to the operational efficiencies started cropping up. Soon Sanjay Aggrawal, CEO of the airline issued a statement saying the airline would rationalize network and drop unprofitable routes due to high operating costs and lower yields. The airline, according to reports, just could not manage operations due to financial crunch.
December 2011: SBI Caps, which the airline had hired to assess its business and recapitalisation needs, pegged KFA’s working capital requirements at Rs 680 crore. The lenders curtly told the airline to clear all its dues before seeking fresh loan. The arrears estimated by banks till the end of December were Rs 260-280 crore. That time KFA had debts of about Rs 7000 crore.
Jan 2012: SBI declared KFA, as NPA (Non-performing asset). SBI, with an exposure of Rs 1,457.78 crore, is the largest creditor and leads the consortium of banks in the DRP (Debt Recast Package).
Feb 2012: Other banks including Bank of Baroda, PNB, IDBI and Bank of India followed suit and declared KFA as an NPA. Simultaneously, KFA started to sink into a fresh crisis. Several flights were cancelled and aircraft were grounded. Of the 64 aircraft, only 22 were known to be operational by February 20. (cut out-with this)Kingfisher's market share dropped to 11.3%.
March 2012: The Income-Tax department started freezing KFA bank accounts as it was unable to pay all the dues as per schedule. KFA was meant to pay Rs one crore per working day. It reportedly missed the deadline set by the board and could not pay the dues until the evening on February 29.
April 2012: By now, pilots and engineers had struck work at least a dozen times due to nonpayment of salaries on time. Mallya had a series of meetings with his staff only to assure that he will pay salaries on time and the staff should stand by him in times of crisis.
May 2012: Employees resumed work with assurances from their boss that salaries will be given on time. But from the 69 flights it operated until a few months ago, the operations had shrunk to around 20 flights per day as many employees had left the airlines.
June 2012: The airline’s fleet shrunk further to 15 aircraft due to financial crunch and employee agitation. Regular meetings with bankers did not bear any fruits. But there were news reports about banks wanting to sell-off collateral pledged by the airline against loans.
July 2012: However, KFA stated that the meeting of the consortium of banks was convened in the normal course with a properly circulated agenda. There was no discussion on loan recovery or forced sale of any collateral, it clarified.
Aug 2012: The airline’s net loss for the June quarter more than doubled Rs 650.8 crore due to costs associated with non-operating aircraft. The airline had posted a net loss of Rs 263.5 crore in the same period last year. The airline maintained its stance that it will return to glory once it gets equity investors.
Sept 2012: The government announced 49% FDI in aviation, a move that could benefit ailing carriers like KFA. The airline welcomed the move saying the industry will be benefitted by it. KFA also said that the airline was in talks with various strategic investors for stake sale
Oct 2012: Yet another bankers meet is scheduled at the month-end. Not only has the airline been asked to present a fresh revival plan, but the BSE and NSE have also demanded details of stake sale news that has been floating in media. Mallya has been asked to respond stating whether any stake sale is actually happening or not.
