Kingfisher borrows Rs1,000 crore from ICICI; defers international plans

Bangalore: Kingfisher Airlines seems to have gotten itself a breather with an in-principle approval from ICICI Bank for a Rs1,000 crore loan towards operational expenses.

Reports suggest that the airline, and its holding company, UB Holdings, have banked towards debt with the market turmoil in the aviation business leaving them with no option but to defer plans to raise fund from equity market.

The Economic Times cited unnamed company sources as confirming that an in-principle approval from ICICI Bank for Rs1,000 crore debt had indeed been received, and that the company would be drawing Rs500 crore by the first week of July. The Indian aviation sector is going through a particularly rough patch, with unprecedented aviation turbine fuel prices which are 40 per cent higher than in the global market, and at the same time being hammered by a slowdown in the growth of air traffic which had taken it down to single digits.

Kingfisher chief Vijay Mallyahad earlier decided to defer fund raising via the equity route on account of a downturn in the market sentiment during recent months. Moreover, Kingfisher is reported to be rethinking the launch of its international operations as well, given the rise in crude oil prices and the volatility in the market.

The Business Standard reported that Kingfisher executive vice president Hitesh Patel confirmed the re-evaluation of all plans for international operations, in view of the costs and route network. As per its original plans, Kingfisher would have launched its international operations with a Bangalore – San Francisco flight on 27 August. Thereafter, services to New York, London and South East Asian destinations would have been added.

Industry sources say the derailment of Kingfisher's international plans comes as no surprise in view of the spiralling prices of jet fuel that has seen many international and foreign airlines filing for bankruptcy, and have seen others rationalise their capacities or scale back operations. Analysts say Kingfisher could be taking a lesson from rival Jet Airways, which earlier in the week posted a loss of Rs221 crore for the last financial year, of which two thirds came from international operations.

Mallya had acquired Air Deccan, which is scheduled to be accorded approval for international flights this August, with the aim of flying the merged airline abroad. He had even lobbied New Delhi to remove restrictive clauses in the aviation policy that needed an airline to complete five years of domestic operations before permission to fly abroad could be granted. Kingfisher has accepted delivery of its first wide-body Airbus A330 that was to be deployed on international flights, and is scheduled to receive another ten aircraft, including the Airbus A340 by the end of the year.