Rs 80k cr is airline industry’s total debt

The ailing airline industry accumulated a total debt of Rs 80,000 crore in 2011, says an internal report by the State Bank of India. This has been attributed to an increase in input costs, congestion, and high competition in a time of economic slowdown.
"The Indian airline companies are under huge debt. The combined airline debt stands around Rs 80,000 crore," the State Bank of India (SBI) has stated.

According to SBI's records, the largest public sector bank in the country registered a 5% increase in its exposure to the aviation industry. The bank, which has given loans to three of the biggest loss-making carriers in the country — Kingfisher, Jet and Air India — had an exposure of Rs 6,091 crore last year, as against Rs 5,799 crore in 2010.

The public sector bank has granted loans to Paramount Airways, Deccan Cargo & Express Logistics, Maritime Energy Heli Air Services and Jagson Airlines as well.

It is important to note that the bank has a maximum exposure to carriers that have been rated between borderline risk (SB-11) and pre-default risk (SB 15, which means the carrier is vulnerable to default). So this means that the bank has granted loans to airlines that are in critical shape financially.

"The increase in the share of the total exposure in the SB 11-15 rating band from 70% in March 2010 to 95% in June 2011 is due to the down gradation of rating of Kingfisher Airlines from SB 08 (average risk) to SB 15," the report suggested.

The bank has a total exposure of Rs 1,961 crore to cash strapped Kingfisher, which is currently on ventilator, with Rs 1,596 crore as loans and advances and an investment of Rs 365 crore in form of equity. The bank has reduced the rating of the airline from being an average risk to becoming a defaulter in its report.

The bank has given loans worth Rs 1,898 crore to Jet Airways India Ltd and just Rs 2 crore investments in form of equity. The total exposure of SBI to Jet Airways, excluding JetLite, is Rs 1,900 crore. JetLite, on the other hand, has been granted a loan of Rs 269 crore.

The third largest borrower of the bank is national carrier Air India, which has been given a loan of Rs 1,651 crore. The Paramount Airways account has been declared as a non-performing asset, thus resulting in a loss of Rs 87 crore.