The Ministry of Civil Aviation has decided to ask the Ministry of Finance to lend a hand to the airline industry. It wants the Finance Ministry to ask banks to reschedule the debt of the domestic airline industry. The debt of Jet Airways, Kingfisher Airlines and Air India together is estimated at more than Rs 50,000 crore, according to the Centre for Asia Pacific Aviation (CAPA).
Official sources, while confirming the development, told Business Line that the acceptance of the proposal would not only help private airlines but also Air India. At the end of March 31, 2009, Jet Airways had secured loans of Rs 4,500.92 crore, while the unsecured loans stood at Rs 11,547.61 crore. Kingfisher's debt is estimated at about Rs 5,500 crore.
“The industry is going through a bad patch. If some help can be extended it will be beneficial,” said a senior Government official. Sources indicated that one of the options which could be looked at was asking banks to provide more time to airlines to repay their loans, something which had happened internationally. The move to seek the intervention of the Finance Ministry comes close on the heels of the Chairman and CEO, Kingfisher Airlines, Mr Vijay Mallya, meeting with senior officials of the Ministry of Civil Aviation here on Tuesday.
The CEO, Indian Subcontinent and Middle East of CAPA, Mr Kapil Kaul, felt that rescheduling of debt was justifiable as the industry was returning to the growth trajectory. “Some Indian banks may have no other option but to reschedule as they have high exposure to airlines. A letter from the Government will act as a comfort factor,” he added.
If the request from the Ministry of Civil Aviation is acceded to, then it will not be the first time that the Government has taken steps to bail out the industry in troubled times. In October 2008, a relief package was announced that allowed the airline industry to repay its then cumulative outstanding in six monthly instalments; a 90-day grace period was also given to clear fuel bills. After a meeting then between the Ministries of Petroleum and Civil Aviation it was decided that oil companies would revisit the aviation turbine fuel prices on a fortnightly basis..
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