Mallya once again says that there is a deal to recapitalise Kingfisher Airlines - Business Standard

As hopes for the revival of grounded Kingfisher Airlines is growing dim with many potential deals falling through, UB Group Chairman Vijay Mallya has once again said that he expects a revival as talks are on with an investor keen on the debt-ridden airline. The outcome of the deal is likely to be known in 90 days, he said, adding that UBHL is considering continued investment in the airline including the payout of a month's salary to KFA employees. 

At the company's annual general meeting on Tuesday in Bangalore, Mallya said the two recent developments in the Indian aviation industry with Tata Group announcing a minority stake in Air Asia and a majority stake in Singapore Airlines would boost investor sentiment in the potential for the industry in India. 

"Obviously this is encouraging news for potential investors in the airline industry in our country when an entity of the magnitude of the Tata Group is showing interest in not one ...but two airlines.  In fact there is an investor who is serious and is engaged in dialogue with us - the outcome, one way or the other will be known in about 90 days," Mallya said while addressing shareholders.

Mallya also said the board of KFA has asked the board of UBHL to continue some interim funding "to keep the lights on" at Kingfisher Airlines. UBHL, which has invested heavily in KFA and still has dues of about Rs 3500 crore, is also considering a payout of one month's salary to the employees of Kingfisher Airlines, subject to the approval of the Karnataka High Court. 

Employees and shareholders speaking outside the AGM said they did not have much hope from the new deal to revive KFA being talked about. But, the Karnataka High Court has granted the company 4 weeks of time to provide the update on a likely deal, after reviewing a confidential document submitted by KFA said to be suggesting advanced level of talks. 

However, during the AGM shareholders have expressed considerable apprehension over the working of KFA even if a deal goes through this time around. With the entry of Tata Group into the space, and two new players - AirAsia and Singapore Airlines sending shudders through the currently operating airline industry, shareholders questioned KFA's chances to survive with the business model that led to its downfall. 

"Considering all the developments in the airline industry, I feel the business model and the  way in which we operate may not be right," a shareholder told Mallya, asking if the Chairman could make a categorical statement assuring investors that the airline would be able to compete with others in the industry, in the event of a revival.

Mallya himself acknowledged that the aviation industry  has been plagued by soaring crude oil prices, with the depreciating value of the Rupee only adding to existing operational troubles. "I have questioned if a full recovery is possible through airfares," Mallya said on the rising costs that have challenged profitability in the sector. 

Mallya said negative reports in the media led to the failure of several deals and lack of co-operation from employees led to the airline's license being revoked. Employees, present at the AGM said they had worked for 7 months without salaries before deciding to stop flying. They are due 14 months of salaries till date. 

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