ibnlive » Business

Feb 21, 2012 at 04:06am IST

Kingfisher crisis deepens; Govt refuses to bail out

New Delhi: Savaged by rising losses, huge loans, mounting fuel bills, unpaid employees and a battery of suppliers to pay Kingfisher Airlines is struggling. Moreover, the country's leading airline's plight has just got worse, with its flights were cancelled, and flyers left stranded for a third day in a row.

A desperate airline has urged the income tax department to unfreeze its bank accounts even as it scouts for funds.

ALSO SEE Government says no to Kingfisher bailout

It's total losses stand at over Rs 1000 crore and accumulated debt at Rs 7000 crore. As a result, its lenders have decided to lend no more money.

The airline cut down its operations last year to save money and lost market share which sliped to 12.1 per cent in December.

ALSO SEE I apologise to passengers: Vijay Mallya

Experts says Liquor baron Vijay Mallya committed many mistakes, which lead to this crisis.

There were frequent changes in the business model and there was a lack of management depth.

ALSO SEE 34 Kingfisher pilots quit in Feb: sources

It's the best domestic airline in terms of service, but it could never convert it commercially.

It also failed to capatilise after buying out Air Deccan - it could not manage the acquisition challenges and killed the brand. This as a huge debt and interest burden seriously weighed down the airline.

ALSO SEE Air fares rise due to Kingfisher crisis: agents

The Government said it will push through with the FDI from foreign airlines to help ailing Kingfisher.

Minister of Civil Aviation Ajit Singh, however, said that the Government will have no bail out package for kingfisher.

ALSO SEE Will Kingfisher's licence be terminated?

"The Government can't give a bail out package to private airlines," said Singh.

The Minister said that the banks will have to decide on how much money they can give to Kingfisher Airlines. Banks can give money to the airline under RBI norms.

Kingfisher has also opened talks with SC Lowy Financial, a Hong Kong distressed debt firm, in a sign it may be running out of traditional funding options.

Kingfisher has also presented its viability report to its consortium of lenders.

Reports suggest that Kingfisher wants a term loan worth Rs 1000 crore, a working capital loan of Rs 440 crore and equity infusion Rs 1500 crore.

With Government's FDI promises far away, this seems to be Kingfisher's only lifeline.