India's Kingfisher Airlines to partner with foreign firms

Feb. 28--NEW DELHI (THE STATESMAN/ANN) -- Kingfisher Airlines, owned by Indian liquor baron, Vijay Mallya, is in talks with two foreign carriers, including International Airlines Group (IAG), the owner of British Airways and Iberia, for a potential rescue package, a report said.

This could pave the way for IAG to take a minority stake in the troubled Indian airline, a report in The Times said.

Mallya, who controls 58 per cent of Kingfisher, told The Times that he had secured provisional approval from the Indian government for a change in the law that would ease restrictions on foreign ownership of airlines.

He claimed that the foreign carriers, which he refused to identify, stood ready to invest as soon as the change was announced -- possibly within days.

It would allow overseas airlines to own up to 49 per cent of an Indian airline for the first time. Mallya expressed confidence that a deal with a "foreign strategic investor" was likely.

The report quoting a financial source in Mumbai named one of the airlines involved as IAG.

Etihad, the UAE-based airline, is also keen to have discussion on a tie-up, which would involve the foreign groups providing equity in exchange for a minority stake.

Meanwhile, hoping to resolve the crisis facing Kingfisher Airlines early next week, Vijay Mallya today said he has organised funds to pay "seriously overdue salaries" to the employees.

Mr Mallya gave no details about the funding but said the airline promoters have converted their loans for an additional five per cent equity last week.

In a letter to the employees, Mallya also lashed out at "Indian and 'paid' media" for their reports on the cash-strapped carrier, saying they would do whatever it takes to achieve their "sensationalist objectives".

"I have organised funding so that we can pay your seriously overdue salaries which is a source of great personal sorrow for me. We are currently handicapped as our bank accounts are frozen by the tax authorities," Mallya said.

Kingfisher which has debts of 6,300 crore rupees, needs an immediate cash injection to remain solvent, the report said. (one crore is equivalent to 1,000,000)

Its fleet of aircraft has fallen to 28 from 64 and many of its pilots have deserted because they have not been paid.

Last night, IAG, according to the report, welcomed the possibility of a liberalisation of India's aviation industry but said that it was "too early to speculate about IAG's interest in any Indian airline at this stage."

Etihad said: "We talk regularly and frequently to many airlines about issues and opportunities."

However, in yet another flip flop, State Bank of India once against distanced itself from turbulence-hit Kingfisher Airlines as the lender's managing director Krishna Kumar ruled out fresh loan to Vijay Mallya promoted private carrier since KFA has already been announced an NPA by a consortium of 18 lenders.

Last week, SBI gave some hope to KFA by giving an impression that it was about to throw a new lifeline to the beleaguered airline. The SBI executive said only the consortium would take a final decision on helping KFA. Kumar said the lenders' club has been meeting regularly to evalute the situation.

But as the private carrier is yet to clear its dues to business partners, fuel supplying companies, leasing companies, income tax department and the employees on its pay-roll the question of bail out remains in limbo.

Kingfisher Airlines, which has not made a profit since it was formed in 2005, has been hit hard by a combination of rising fuel prices, high taxes in India and a falling rupee.

The company's auditor has raised questions about its financial viability without any infusion of cash, the report said.