No matter what the airline companies are facing, banks and financial institutions will continue disbursing loans to some airline companies like Jet Airways and Kingfisher Airlines.

Jet Airways has recently been sanctioned a loan of Rs 700 to 800 crore from a group of public sector banks that includes industry major like State Bank of India and Punjab National Bank. Even Kingfisher Airlines that merged with Air Deccan is on its final stages of loan sanction of Rs 600-800 crore by another group of banks that includes Bank of Baroda and Indian Overseas Bank.

An analyst said, "Jet has been looking for a loan of around $300 million (Rs 1,500 crore). It has already been given $100 million and will get a part of the other chunk before the end of this financial year."

However Kingfisher Chairman Vijay Mallya did not agree about any such association with Bank of Baroda or any group of banks. Meanwhile he informed that they are receiving finance from various banks. "We have no discussion with Bank of Baroda. KFA does not have a bankers' consortium. All I can confirm is that multiple banks have provided sufficient lines of credit to KFA, which is meeting all its obligations including payments of overdues to oil marketing companies (two installments paid on time already) and to Airports Authority of India (three installments paid on time already)," he said.

Experts from the banking industry said that disbursing loans to aviation companies that are suffering losses in the recent past is wearing away of the net-worth. A senior banker with a public sector bank said, "They were already leveraged. After the losses they need to fund through equity route to bolster the net-worth. Otherwise the debt-equity ratio of these companies changes disproportionately."

The banker informed that by Jet Airways faced a fall in its net-worth of Rs 777 crore and Rs 385 crore in the first quarter and second quarter of the current fiscal respectively. In the fiscal year 2007-08, its net-worth stood at around Rs 2,237 crore but the airline has changed its methods of depreciation accounting and clocked a profit of Rs 144 crore for the first quarter of the fiscal.

Industry sources say that Jet Airways is in discussions with several banks for a loan worth Rs Rs 1,500 crore and it has also received secured loans of Rs 1,000 crore from Mubadala Development Company, an investment firm in Abu Dhabi. Even Kingfisher has secured loans worth Rs 1,000 crore from ICICI Bank.