Troubles Mount For India's Kingfisher Airlines

Is there any good news for Kingfisher Airlines (NSE: KFA)?

Vijay Mallya, the Forbes billionaire that owns the airline, can?t get a break with this discount flier that is vanishing before Indian travelers? eyes.? India?s second-largest airport operator, known by the acronym GVK, recently launched legal proceedings against the beleaguered airline following a round of bounced checks upwards of 60 million rupees made payable to airports like Mumbai International. So far this year, the company has bounced around 30 million rupees in checks, according to press reports.

Sources told the Economic Times that the Mumbai International Airport filed a suit in a Mumbai civil court last week when a check for around 5 million rupee bounced. ?This has been going on for a while and the airport operator thought the time has come to take legal action,? said an airport source who did not want to be identified.

This is the first time an Indian airport operator has taken the cash-strapped airline to the courts over non-payment of dues. Analysts tracking the sector said Mumbai International?s decision to adopt legal means is because they have run out of options to amicably recover the overdue airport fees.

Kingfisher Airllines? story may be coming to an end.

Eighteen lenders to the airline will meet next week to discuss whether or not to continue letting Mallya?s company borrow.? The Bangalore-based carrier, which has struggled to pay salaries to employees for the past four months amid promises to do so as recently as April, has defaulted on tax payments and bills to its vendors. It has been seeking new credit lines since last December and trying to raise money from capital markets abroad.

Mallya also runs the profitable United Breweries Group (NSE: UBHOLDINGS), owners of the popular Kingfisher beer label, so he has plenty of money to fund the airline.? There was talk of him selling some shares in the brewery to help pay for the company?s obligations, but whatever he did sell was obviously not enough to cover this debt burden.

Some of the 18 lenders meeting next week hold a 23.4 per cent stake in Kingfisher Airlines. The company reported a loss of around 1.15 billion rupees in the March quarter and has debt of over 7.5 billion rupees and an equal amount of accumulated losses. The State Bank of India, SBI, holds a 5.67 per cent stake in the airline now.

It?s been a money loser for all involved.

The airline has not made any profit since its launch in May 2005.

United Breweries share price is up 5.75 percent year to date, while Mallya?s Kingfisher Airlines is down 34.7 percent.

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