Financial turbulence hits Guna, Agni

KATHMANDU, DEC 20 -

Cash-strapped Guna Airlines has put up its entire assets on sale after failing to raise enough cash to repay its bank loans. The carrier owes around Rs 230 million.

The owner of the airline, Guna Group, suffered massive losses on its housing ventures after real estate prices plunged. With creditors on its heels, it has planned to sell the airline to raise cash to pay them off.

Rajendra Shakya, executive chairman of Guna Airlines, has planned to sell the company at around Rs 550 million. “We are currently in discussion with three prospective buyers who are from the travel agencies,” said Shakya. “If we fail to get the expected price for our entire assets, we will only sell the aircraft.”  A few years ago, Guna had sold one of its aircraft to Canada-based company at Rs 220 million. Established in 2009, Guna Airlines has a fleet of two aircraft—Beechcraft 1900—which it bought from Buddha Air.

On the other hand, Sudhir Basnet, chairman of Agni Air is now mulling to bring the airline back into operation after his attempts to sale the company ended in failure. Basnet, who also owns Oriental group, had earlier planned to sell its assets to repay bank loans.

Basnet estimates Rs 30 million will be enough to get the airline off the ground. “We can put all four of our aircraft into operation if we manage the amount,” Basnet said, adding that the airline’s operation would put the company in a position to manage a daily cash flow of Rs 1.5 million.

Started in 2006, Agni Air has five aircraft—three Jetstream 41 and two Dornier. However, of all the aircraft only one Dornier is in airworthy condition. The rest of the aircraft have remained grounded due to technical glitches.

Both, Agni and Guna landed in trouble due to their promoters’ overexposure to realty business. Basnet and Shakya are the major players of domestic realty business that is currently going through a recession. The slowdown in the realty sector strangulated the groups’ cash flow, making a knock-on effect on their airline business.  

Basnet is grappling with multiple crisis as a majority of his housing projects are still incomplete, blocking the group’s cash flow. Although the airline made a profit in the last fiscal year, it could not escape from  promoter’s liabilities in other sectors.

Several companies including Yeti Airlines Domestic and Swift Air Nepal had shown interest to acquire the beleaguered carrier, according to bankers that had provided loans to Agni Air. Although the promoters had priced the airline at Rs 800-900 million, the best price they got was Rs 600-650 million. Agni Air had initially priced its entire property and aircraft at Rs 1 billion.

A consortium consisting of Grand Bank, Sunrise Bank and International Leasing and Finance Company have lent Rs 650 million to Agni Air. The airline not only owes huge amounts in bank loans, but it has not also paid its staff and landing and parking charges to the airport authority. Basnet claimed that his group owes Rs 2.50 billion in loans and added that around Rs 400 million is required to settle the ongoing problem.

In the case of Shakya, his group owes Rs 1.09 billion in loans. “Our problem is only in cooperative,” Shakya said. The problem emerged after the merger of Guna’s seven cooperatives, according to him. “As all depositors asked for refund at once subsequently after merger, we could not manage enough funds to pay them,” Shakya added.

However, he insists there were no problem in housing and other businesses. A few months ago, Shakya had reduced his loan liabilities to some extent by selling his shares in Kist Bank. He claimed that he has already paid loans of Rs 1.04 billion in the current fiscal year. He said that he was compelled to sell apartments at reduced price to generate resources.

Due to the problem, Agni Air saw its passenger carriage fall 19.11 percent in the first six months of 2012. Similarly, Guna Airlines saw its passenger movement drop by 77.30 percent in the first half of 2012 compared to the corresponding period last year.

Guna aircraft were grounded in April and May for regular maintenance, resulting in heavy losses in passenger movement.

Source: The Kathmandu Post