WL Ross may catch Kingfisher after SpiceJet airline success

The firm may already be in discussions with the Mumbai-headquartered carrier to commit some $100-150 million.

Kingfisher formally denied the reports, but the airline, owned by Indian industrialist Vijay Mallya through his United Breweries Group, is known to be seeking solutions to its over INR7000 crore ($1.57 billion) debt burden, the largest of any Indian airline. Kingfisher appointed former SpiceJet CEO Sanjay Aggarwal, credited with leading SpiceJet into profit within two years, as its new head in September, following SpiceJet’s sale to Sun TV media magnate Kalanithi Maran.

Kingfisher is still operating at a loss and the company has announced a restructuring of the airline’s debt burden, with 30% to be converted by the banks into equity, and cost-trimming measures, including sacking expat pilots in favor of cheaper Indian flyers. The Reserve Bank of India has made the restructuring conditional on new equity investment, hence the search for investors. But Binit Somaia, Director, South Asia, at the Centre for Asia Pacific Aviation, told AVCJ that turning round Kingfisher could be a tough proposition. “Kingfisher is more than four times the size of SpiceJet, and has a much more complex operating model.”

WL Ross’ $80 million convertible bond investment into SpiceJet in July 2008 for a 30% stake still ranks as one of the largest investments in India’s aviation sector. The firm exited the stake for $127 million, a 58% profit, in June 2010 after Maran bought SpiceJet. Wilbur Ross, who held a board seat at SpiceJet, attributed the investment’s success partly to Aggarwal and the WL Ross-backed management team, and partly to timing the oil price cycle.

WL Ross and Aggarwal’s experience could well be much in demand at Kingfisher. The airline did a reverse merger with Air Deccan, a struggling low-cost carrier, in December 2007 to gain access to international routes. “By the time the airline was three years old, it had a fleet of 80 aircraft, an expansion perhaps unprecedented in global aviation,” said Somaia “The timing was unfortunate, coming just as fuel prices started to spike and the economy started to slow.”

However, the industry outlook is positive and “double-digit traffic growth is very likely,” confirmed Somaia. As such, WL Ross could have another winner on its hands. 

Further reading

After SpiceJet, Ross may invest India's Kingfisher Airlines

• Infrastructure
• 07 Oct 2010

Istithmar exits SpiceJet for $25.3 million

• South Asia
• 07 Jul 2010

WL Ross exits SpiceJet at a premium

• South Asia
• 15 Jun 2010

Ross flies out of SpiceJet

• Industrials
• 14 Jun 2010

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• Topics
• South Asia
• Infrastructure
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• Restructuring
• Wilbur Ross
• WL Ross & Co.