Ficci seeks bailout package for aviation industry amid coronavirus lockdown

Industry lobby Ficci has sought a bailout package for the domestic aviation industry, including direct cash support from the government, interest-free soft loans and a two-years tax holiday to help the sector overcome the COVID-19 crisis.

It also pitched for deferment of term-loans by up to six months, 180-days credit window by the oil marketing firms and waiving of aircraft insurance premium, among others.

At the same time, Ficci also urged the government not to allow the operations until all states remove the lockdowns completely, saying that the restoration of partial services will only add to the financial woes of the domestic carriers.

The coronavirus pandemic has impacted the aviation industry the most, with the grounding of commercial flight services fully or partially resulting in substantial losses to all stakeholders including airlines and airports.

"The aviation industry is facing a crisis of unimaginable proportion due to the impact of the COVID-19 pandemic. With prolonged travel restrictions in place around the world, one of the major challenges faced by the aviation industry is a massive plunge in cash reserves as fleets remain grounded for almost a month now.

"Many airline companies are on the brink of bankruptcy," Ficci Aviation Committee Chairman and President and Managing Director of Airbus India and South Asia, Anand Stanley said in his recommendations to Civil Aviation Secretary Pradeep Singh Kharola.

Global airlines grouping the International Air Transport Association (IATA) estimates that almost 30 lakh jobs are at risk in the Indian aviation dependent sectors, he said in the committee's recommendations submitted to the government on Friday.

In addition to cutting down flights, airlines are putting aircraft in storage, moving forward fleet retirement dates and deferring delivery of new aircraft, he said, adding what the Indian aviation industry needs to survive is an immediate bailout from the government.

"We also urge the government to not remove the grounding until and unless the states also remove their lockdowns, so that people can actually travel.

"If the grounding is lifted but people are still not able to freely travel, it will make the situation even worse as lessors and other creditors will then further increase the intensity of their demands thinking our revenue generation capacity is back, when it is not. Demand will not return unless lockdowns are fully removed," he said.

Significantly, this is contrary to the position taken by the local carriers, some of whom were quick to announce resumption of services in a phased manner from May 4, immediately after the government extended the lockdown to May 3, in their bid to woo customers.

Ficci, in its recommendations, said the deferment of EMI on term-loans should be extended upto six months and airlines should be extended interest-free soft loans for a periof of one year, besides waiving of taxes and not deferment for a period of two years.

It also said that interest, penalties, delayed charges and accruals to airport operators should be waived for the airline companies, and airport operators could be adequately supported by the government to make up for the gap.

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Recommending that loans, loan guarantees and support or the corporate bond market by the government or the RBI, either directly to the airlines or to commercial banks are required, it said it is likely that banks may be reluctant to extend credit to airlines in the present situation in the absence of such guarantees.

The corporate bond market is a vital source of cash, but the eligibility of corporate bonds support needs to be extended by the central bank and guaranteed by the government to provide access for a wider range of companies, it said.

The liquidity position of all airlines will be benefited if the interest-free unsecured credit period for payment of fuel charges to oil marketing companies is enhanced to 180 days from the current 21 days.

Besides, it has also sought deferment of payment of GST for the airlines as well as rebates on payroll taxes paid to date in this year and/or an extension of payment terms for the rest of 2020, along with a temporary waiver of ticket taxes and other government-imposed levies.

Ficci said financial aid in terms of reduction in airport charges, overflight fees, taxation on passengers on security, waiver on parking and landing fees should be provided along with royalties to the airports for using the infrastructure, among others.