Etihad Airways To Buy 48 Percent Stake In Kingfisher Airlines: Report

  on December 11 2012 7:00 AM
Kingfisher Airlines
Kingfisher flight IT 3149 at an isolation bay of Chattrapati Shivaji airport in Mumbai May 20, 2010. REUTERS

Kingfisher Airlines has reportedly finalized a deal with Etihad Airways to sell 48 percent of stake, in a move aimed at bringing the much needed funds to the beleaguered private airline in India to resume its operations.

According to the deal, first reported by the Mumbai Mirror, Gulf carrier Etihad Airways (EA) will be investing 30 billion rupees in Kingfisher Airlines initially. At a meeting held in Abu Dhabi, both the companies finalized the stake sale and completed discussions on issues relating to the management control, the report said.

An official confirmation of the deal will be made Dec. 28, on the birthday of Kingfisher’s flamboyant chairman Vijay Mallya. EA will be picking up 30 percent stake in the first phase and another 18 percent on a later date, the Mumbai Mirror has reported quoting the sources.

EA was eying the stake purchases in both Kingfisher Airlines and Jet Airlines and had been in talks with the respective companies for months. According to the sources, the deal with the Jet Airways fell apart as the Indian airline rejected some clauses on management.  

Kingfisher has been grounded since October following a strike by its employees over the nonpayment of salaries. The debt-ridden air carrier’s license was suspended by the Directorate General of Civil Aviation (DGCA) Oct 20 as the company had failed to meet DGCA’s guidelines on passenger safety and service quality.

The air carrier has an estimated debt burden of over $2.5 billion and has defaulted its vendors and creditors for the past several months. The Civil Aviation Ministry and the DGCA toughened their stand against the airlines and asked the management to provide a foolproof plan to allow it to resume the services.

The employees ended their strike last month following the assurances from the management that their salary dues would be paid according to a staggered schedule.

Launched in 2005, Kingfisher was once India’s second-largest airline, but it never made profit.

Kingfisher Airplanes Impounded

In another development, Mumbai International Airport Ltd Tuesday seized seven Kingfisher Airlines for nonpayment of charges to the tune of 530 million rupees while the Service Tax Department has impounded an aircraft for defaulting the tax dues amounting to Rs. 630 million.  

"Until the long-pending dues are cleared, we shall not let them fly these aircraft, which are in our control," an official told IANS on the condition of anonymity.

“We have seized one ATR aircraft of the Kingfisher Airlines as the carrier has failed to clear our dues,” Mumbai Service Tax commissioner S.K. Solanki told the Press Trust of India (PTI).

The beleaguered airline owes around Rs. 1.90 billion to the Service Tax Department, of which Rs. 1.27 billion are under litigation, the PTI has reported.

Kingfisher shares rose 4.96 percent to 15.67 rupees on the BSE Sensex Tuesday following the report of the deal with Etihad.  

Join the Discussion