Kingfisher woes could hit funding for other Indian airlines - DVB

FRANKFURT Wed Feb 6, 2013 9:44pm IST

A Kingfisher Airlines aeroplane sits on the tarmac at Chhatrapathi Shivaji International Airport in Mumbai, March 9, 2012. REUTERS/Vivek Prakash/Files

A Kingfisher Airlines aeroplane sits on the tarmac at Chhatrapathi Shivaji International Airport in Mumbai, March 9, 2012.

Credit: Reuters/Vivek Prakash/Files

Stocks

   
Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

FRANKFURT (Reuters) - India could be "shut out" of the market for aircraft finance if carriers such as troubled Kingfisher Airlines fail to return planes they cannot pay for, a senior banker told Reuters on Wednesday.

Kingfisher (KING.NS) - owned by liquor baron Vijay Mallya - is estimated to owe $2.5 billion to banks, staff and suppliers, and its grounded aircraft are at the centre of airports', banks' and tax authorities' scramble for assets.

Wolfgang Driese, chief executive of Germany's DVB Bank (DVBG.F), which is a major supplier of specialist transport industry loans, said India should step up efforts to show assets can be repossessed when bills go unpaid.

"Otherwise it (India) would shut itself out of the market," he said.

DVB Bank has sued the Directorate General of Civil Aviation (DGCA) and Kingfisher Airlines to have two planes de-registered, a possible first step towards recouping its funds.

"If we are unable to repossess the aircraft, we will not underwrite new business in India," DVB's Driese said. This was likely to send a signal to other banks, he said.

The warning raises industry pressure on Indian aviation authorities to prevent a crisis over Kingfisher, crimping the ability of other fast-growing airlines to take delivery of the latest generation of jets.

The head of International Lease Finance Corp, one of the world's largest lessors, told Reuters last month India could see its aviation ambitions curtailed if it did not provide a "safe harbour" for assets risked by foreign suppliers.

"There are several countries in the world, where we are not doing any business as asset arrests prove impossible or just too time-consuming," DVB's Driese said.

The DGCA must deregister the DVB-financed Airbus planes, now in Istanbul, before the bank can put them to use or lease them out.

Kingfisher has 33 scheduled passenger planes registered in India, according to data from the DGCA. It had a fleet of 64 a year ago, when it was India's No. 2 carrier by market share.

Debt-ridden and with no customers, Kingfisher posted a 7.55 billion rupees loss in the three months to December 31 as its planes sat idle, creditors circled and regulators rebuffed the Indian airline's revival plans.

Aircraft are mostly paid for on delivery, meaning any shortfall in funding could affect the handover of jets on order from manufacturers such as Airbus EAD.PA and Boeing (BA.N).

Europe's Airbus has a total of 384 aircraft on order from India that have yet to be delivered, according to end-December data. For its U.S. rival Boeing, the figure is 107 aircraft.

(Additional reporting by Tim Hepher; Editing by Louise Ireland)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Election 2014

Election 2014

Kashmiris wary as Modi challenges for power.  Full Article 

Facebook's Performance

Facebook's Performance

Facebook Q1 revenue grows 72 percent on rising mobile ads.  Full Article 

Earnings Season

Earnings Season

Bharti Infratel Q4 net profit jumps 64 percent.  Full Article 

Monsoon Forecast

Monsoon Forecast

South Asia monsoon seen below-average to average in 2014 - WMO.  Full Article 

Solar Dispute

Solar Dispute

Green groups urge U.S. to drop solar trade case against India.  Full Article 

Oil Imports

Oil Imports

India to make May-July oil payments to Iran - sources.  Full Article 

Rice Exports

Rice Exports

India may cede top rice exporter spot under Southeast Asian price onslaught.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage