Banks with significant shareholding in Kingfisher Airlines saw the street shorting their stocks on Friday. All six banks dropped between 1.2 per cent and 4.2 per cent.

Market experts feel the company needs to re-look at the fundamentals of their business and any attempt to restructure bad loans could create a fresh set of bad loans for the banks.

“Over capacity and stiff competition have resulted in customers being charged prices that are unsustainable in the long run,” said Mr Anand Tandon, Group CEO, JRG Securities. “If there is an opportunity to make money, then why are the airline companies not making money?” he asked.

It is interesting to note that the aviation turbine fuel (ATF) prices are cheaper than petrol prices in India as on date. Petrol is costlier than ATF by Rs 7.5 a litre in Delhi, Rs 4 in Kolkata, Rs 11.80 in Mumbai and Rs 7 in Chennai according to the prices put out by Indian Oil Corporation on its Web site.

Experts said if petrol can be priced higher for not being a common man's fuel (so that diesel and kerosene can be subsidised), then why is ATF being priced lower than petrol when it is used to fly the upper-middle class or the rich.

The rationale of preventing airline companies from bleeding further on account of high fuel costs is, therefore, not tenable as lower ATF prices alone cannot prop up the industry. Lack of alternative airports in large cities added up to costs in terms of turn around time and parking charges, they said.

“In such a situation, why would banks want to restructure a loan for a second time? It is time the tax payer's money is not used to fund bailouts,” said a banking analyst at an Indian brokerage.

Related Topics