BackKingfisher will fly by summer with `650 cr infusion: Mallya
Promoter tells staff in a letter that the airline plans a limited restart, though no investor has signed to invest more
Premium(S Kumar/Mint)
New Delhi/Mumbai: Kingfisher Airlines Ltd’s promoter Vijay Mallya has reassured employees that the airline will fly by summer with a ₹ 650 crore infusion from the UB Group, but also added that no investor has, as yet, signed on to invest more money in the airline.
Analysts have previously said the grounded airline needs between ₹ 3,000 crore and ₹ 5,000 crore to fly again—in any meaningful way.
“The limited restart plan, which we target for the beginning of the 2013 summer schedule, requires funding of approximately ₹ 650 crore, which is committed to be provided by the UB Group and associates," Mallya said in a 10 January letter to Kingfisher employees.
The letter, which has been reviewed by Mint, is the first from the billionaire chairman to employees after Mallya gave up that practice in August. The letter was issued hours after Kingfisher employees said they would move court to file a winding up petition as salaries haven’t been paid since June.
Kingfisher has been grounded since October.
Writing on prospective investors, he said, “We have been in discussion with prospective strategic as well as financial investors for over a year. A large part of any investment decision hinged upon the government’s policy of FDI (foreign direct investment) in aviation by foreign airlines."
Mallya said movement in discussions related to this was only possible after the new policy was announced on 14 September.
“The aviation industry in India is a seriously complex one, including high costs resulting from excessive taxation and monopolies," he said. “Investors need to be convinced about the long-term prospects of their proposed investment in Kingfisher and this takes time. Please rest assured that we are in discussion with multiple investors and remain confident that we will secure a deal."
In his letter to employees, Mallya also said additional information about restarting the airline would be submitted to aviation regulator Directorate General of Civil Aviation (DGCA).
“We have submitted a detailed restart plan to DGCA, which is in two parts. The first part deals with a limited restart utilizing seven aircraft ramping up to 21 aircraft in four months," he said. “The second part is a full-scale rehabilitation of our airline growing to 57 aircraft within 12 months of recapitalization."
These include details on “key assumptions and funding requirements", including the payment of salaries that have been delayed.
“We have met with the DGCA and are in the process of submitting additional data and no-objection letters from key vendors as required by them," Mallya said. “The factual position is that the civil aviation regulations provides for a time period of up to two years to renew an airline’s scheduled operating permit from the date of expiry. We are on safe ground here."
Banks are supportive of Kingfisher, he said.
“We are meeting with our consortium of banks regularly and keeping them fully informed every step of the way. They have requested our urgent attention to certain overdues which we are addressing with them. The banks have been very cooperative and patient. There has been no discussion at all on recall of loans, enforcement of securities, etc., as reported in the media. On the contrary, the banks have expressed their keen desire to see Kingfisher fly again," he said.
Kingfisher hasn’t paid employees their salaries since June and owes banks more than ₹ 3,000 crore.
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