Mumbai, Oct 5 (PTI):Kingfisher Airlines lenders said Friday they will release funds to the debt-ridden and grounded airline specifically to enable it to pay salaries to its employees, who have not seen a paycheck for months. The same evening, the Director General of Civil Aviation asked the airline to show cause as to why its flying licence should not be suspended or cancelled.
On Thursday, the wife of a Kingfisher technician in Delhi had allegedly committed suicide because her husband had not been paid for months and she could not take the financial pressure. The airline has locked out its staff following an agitation over unpaid salaries.
The State Bank of India, the lead banker in the 17-member consortium that has Rs 7,000 crore stuck in the airline, said the lenders have decided to release funds on “humanitarian grounds”, specifically to enable it to pay salaries to its employees.
“The money that has been released by the tax authorities, 80 per cent of that will be made available to the company on humanitarian grounds, specifically to pay salaries of the employees,” SBI Chairman Pratip Chaudhuri told reporters here.
Sources had said that the bankers held an emergency meeting on Thursday, and agreed to release funds from escrow accounts. The airline will get access to Rs 60 crore.
SBI heads the consortium of 17 lenders to the crippled carrier, owned by liquor baron Vijay Mallya. The airline owes a total of Rs 7,000 crore to the banks.
The SBI chief said that he does not know how much of a solace this would offer. “I don't know how adequate that (the release of money) would be.”
On Sunday, the airline grounded the few aircraft it had been flying after engineers and a section of pilots struck work.
The civil aviation ministry and the sector regulator DGCA have been insisting to keep the fleet grounded unless concerns around safety and wages are solved.
Chaudhuri said the only way forward for the banks is to be patient and wait for Mallya to get an investor.
“Banks are still giving time to Mallya to get an investor. Because if we pull the plug it would be irretrievable. And if we are patient with him, possibly there is a chance he would revive,” he said.
“If we pull the plug now then all possible investors would also walk away. Having waited for so long we might as well wait some more time,” Chaudhuri said.
SBI has a Rs 1,580-crore exposure to the near-bankrupt carrier and has already classified it as a non-performing asset.
“We have made full provisions for this so from here there is no further downside for SBI,” Chaudhuri said.
On the airline's repeated calls for fresh lending, he said, “there are no assets to hypothecate, so there is no room for more debt.”
Meanwhile, on Friday, the seventh day of their strike, a large number of KFA employees, wearing black badges and ribbons, staged a protest march at domestic airport and the Kingfisher House here.
They held placards with slogans like 'Who is a criminal? The poor employees or the management?'
The airline and its promoters have most of their shares and assets pledged with banks. These include the brand Kingfisher pledged for a value of Rs 4,100 crore) and two of its properties - the Kingfisher Villa in Goa and Kingfisher House in Mumbai - together valued at around Rs 200 crore.
Within the consortium, SBI has the single largest exposure with Rs 1,580 crore, followed by IDBI Bank (Rs 720 crore), PNB Rs 435 crore), Bank of India (Rs 575 crore), Bank of Baroda (Rs 530 crore), Central Bank of India (Rs 420 crore), UBI (Rs 350 crore), Corporation Bank (Rs 150 crore), and Federal Bank (Rs 80 crore which is not a loan but an en-cashed bank guarantee to BPCL).
Lenders together hold around 23 per cent in KFA since March, after the banks converted their Rs 6,500 crore of recast debt (after November 2010 CDR) into equity. These stakes were picked up at a hefty premium. When the share was trading at Rs 38, the banks converted these shares at Rs 64.48 per share.
The KFA scrip shed 4.68 per cent on the BSE on Friday to close at Rs 13.25.