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In a damage-control exercise to prevent India's image from being dented in the global market, the civil aviation ministry may issue a guidance to release all Kingfisher Airlines Aircraft parked at Indian airports to international leasing companies.
The move comes in the wake of growing disquiet among major leasing companies over India's refusal to hand over the aircraft and fears that much-needed aircraft finance would be stopped to Indian airline companies.
International Lease Finance Corp (AIG.N) urged India to release six passenger Jets from Kingfisher Airlines Ltd
The head of Aircraft finance giant International Lease Finance Corp (AIG.N) urged India on Wednesday to release six passenger jets held "hostage" by a bureaucratic dispute after struggling Kingfisher Airlines (KING.NS) failed to pay for them.
ILFC had warned in January that a failure to return leased airplanes to their true owners when airlines cannot pay their bills could put the country's aviation growth at risk by scaring off funding.
According to Los Angeles-based ILFC, the Delhi High Court ruled last month that ILFC could have access to its aircraft to ensure they can be refurbished and maintained.
But ILFC Chief Executive Henri Courpron told Reuters that the situation on the ground remained unresolved.
"We have made legal and political progress but people are not following instructions from the government," Courpron said in a telephone interview. "We have to stop this hostage situation."
He did not say which Indian authorities or people he held responsible for failing to apply the court's decision.
Ultimately, ILFC wants to fly the Airbus(EAD.PA) aircraft out of India to allow them to be used by other operators. But that would require the consent of Indian authorities.
For now, the planes are sitting idle in Delhi, Mumbai and Chennai.
Kingfisher's financial difficulties have left the airline's fleet grounded since October.
Germany's DVB Bank(DVBG.F) said in December it had sued India's aviation regulator and Kingfisher to have two planes it financed for the troubled carrier de-registered, a possible first step toward recouping its funds.
The two disputes are seen as an important test of an international agreement known as the Cape Town convention, designed to make it more attractive for leasing companies to invest by duplicating repossession rights available in the United States when airlines default on lease payments.
Courpron said he expected the sale of a majority of ILFC to a Chinese consortium by its owner, U.S. insurer AIG, to go ahead as planned in the second quarter, dismissing doubts expressed by some delegates at a Florida aviation conference that it would.
About 38 percent of the audience at an industry panel predicted in a straw poll that the Chinese sale would not go ahead, but Courpron said ILFC was solely focused on it. (Reporting by Tim Hepher and Karen Jacobs; Editing by Alwyn Scott and Dan Grebler)
Lenders have started the process of monetising collateral to recover part of their loans from Kingfisher Airlines.
The consortium of lenders, led by State Bank of India (SBI), had said last month that they were hopeful of recovering at least Rs 1,000 crore in the current quarter from collateral which includes shares of United Spirits Ltd (USL) and Mangalore Chemicals and Fertilizers, both part of the UB Group.
"I am not very hopeful that anything will happen this financial year as it is already mid-March. We are in the process of receiving the call-up authorisation from the other banks," an SBI official said. "It is a complicated account and there are several things that need to be taken care of. This is not a single one-to-one loan."
A top official from Bank of India, which is part of the core group of lenders, said that they initiated the process a week back but have not sold any assets till date. However, the lenders said the process is taking more time than expected.
The lenders' consortium had decided in February to recall loans to Kingfisher and had constituted a core group to go into the legal aspects of monetising the collateral. "The core group will take a call on this," said an official with another bank, adding that selling shares were a relatively easy method of monetising securities.
Among other securities, the bankers hold about 2.6 million shares of USL shares which were given as collateral during the Kingfisher debt recast in 2010, and which would be valued at about Rs 500 crore at current share price levels.
On February 15, the UB Group had said that it had not received any formal communication from the banks in this regard. "We are in continuing discussions with them on ways to bring down their exposure, interalia, from the proceeds of the Diageo transactions," a group spokesman had said. Kingfisher Airlines Ltd, which has not flown since October, owes over Rs 7,000 crore to a consortium of 17 lenders.
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The head of Aircraft finance giant International Lease Finance Corp (AIG.N) urged India on Wednesday to release six passenger jets held "hostage" by a bureaucratic dispute after struggling Kingfisher Airlines(KING.NS) failed to pay for them. ILFC had warned in January that a failure to return leased airplanes to their true owners when airlines cannot pay their bills could put the country's aviation growth at risk by scaring off funding. According to Los Angeles-based ILFC, the Delhi High Court ruled last month that ILFC could have access to its aircraft to ensure they can be refurbished and maintained.
But ILFC Chief Executive Henri Courpron told Reuters that the situation on the ground remained unresolved. "We have made legal and political progress but people are not following instructions from the government," Courpron said in a telephone interview. "We have to stop this hostage situation." He did not say which Indian authorities or people he held responsible for failing to apply the court's decision. Ultimately, ILFC wants to fly the Airbus(EAD.PA) aircraft out of India to allow them to be used by other operators. But that would require the consent of Indian authorities. For now, the planes are sitting idle in Delhi, Mumbai and Chennai. Kingfisher's financial difficulties have left the airline's fleet grounded since October. Germany's DVB Bank(DVBG.F) said in December it had sued India's aviation regulator and Kingfisher to have two planes it financed for the troubled carrier de-registered, a possible first step toward recouping its funds. The two disputes are seen as an important test of an international agreement known as the Cape Town convention, designed to make it more attractive for leasing companies to invest by duplicating repossession rights available in the United States when airlines default on lease payments. Courpron said he expected the sale of a majority of ILFC to a Chinese consortium by its owner, U.S. insurer AIG, to go ahead as planned in the second quarter, dismissing doubts expressed by some delegates at a Florida aviation conference that it would. About 38 percent of the audience at an industry panel predicted in a straw poll that the Chinese sale would not go ahead, but Courpron said ILFC was solely focused on it. (Reporting by Tim Hepher and Karen Jacobs; Editing by Alwyn Scott and Dan Grebler)
