Several players have a stake in ensuring that the embattled Kingfisher Airlines, owned by liquor baron Vijay Mallya, does not go under.
Banks that have lent the airline money are looking at ways to save the airline as the large sums of money they have loaned to it are now at stake. Aircraft manufacturers such as Airbus and Boeing, too, are likely to take a huge hit if Kingfisher and State-owned carrier Air India cancel their orders to these companies.
Airbus and Boeing currently have multi-billion dollars worth of orders from Kingfisher and Air India. The latter’s order of 27 Boeing 787 Dreamliners is pegged at an estimated Rs 20,000 crore, while King-fisher ordered 127 aircraft from Airbus of which only half have been delivered till now.
“Any cancellation of these orders will mean a huge adverse impact on Airbus and Boeing as these are multi-billion deals. They will suffer badly,” said an aviation industry analyst.
Director (aviation) of the global consultancy major, KPMG, Amber Dubey, said that any deferment or cancellation of orders by Indian carriers will definitely hurt global aircraft suppliers. “Having said that, global suppliers do keep a close eye on the financial health of aircraft buyers and may have factored in such scenarios as part of their risk management plan,” added Mr Dubey.
Financial institutions generally are on tenterhooks because of the dire straits the aviation sector is in. They have an estimated exposure of Rs 7,000 crore to Kingfisher.
Mr Pratip Chaudhuri, chairman of State Bank of India, which has loaned the highest amount to Kingfisher, says it will be difficult for the bank to stop fresh loans to airline companies. “Maybe (we won’t) lend to a new company, but with the existing clients you can’t walk out. Otherwise, the existing exposure would come in jeopardy. It is difficult to shut off the tap,” he said.
In this scenario, there are reports that banks may extend more short-term loans to Kingfisher to ensure that it is able to run its day-to-day business.
As for the government, it has not extended any bail-out to Kingfisher, though Prime Minister, Dr Man-mohan Singh had expr-essed indirect support to Kingfisher when he said recently that “private sector airlines have to be managed efficiently, but if they do get into difficulties, we have to find ways to help them.”
There is much opposition to government bailing out private airlines since this is not an essential service nor is it a sector that affects the poor.