Govt working on policy to help ailing airlines

With Air India and Kingfisher facing fund crunch, the government is working on a policy package to help the entire cash-strapped industry come out of the financial rut, official sources said on Sunday.

In order to formulate such a package, the Civil Aviation Ministry has asked all scheduled airlines, including the profit-making IndiGo, to submit data on their prevailing financial position. Seven scheduled carriers, including Air India, have submitted the required information this weekend, the sources said. The information sought by the ministry relates to their overall financial situation, the extent of debt with financial institutions and their working capital requirements.

A Working Group has been constituted under the chairmanship of Civil Aviation Secretary Nasim Zaidi, which would examine the data and the problems of the airlines.

The sources said consultations would be carried out shortly by the Civil Aviation Ministry, the Department of Financial Services and Banks of the Finance Ministry on the issue. The discussions would aim at preparing an overall policy prescription for the industry, as the government “cannot provide any direct financial dole” to bail out the private airlines.

Besides IndiGo, Air India, Jet Airways, JetLite, Kingfisher, SpiceJet and GoAir submitted the required information.

Premier aviation consultancy firm Centre for Asia Pacific Aviation has forecast a record $ 2.5-3 billion loss for all Indian airlines for the year ending March 2012, with Air India alone likely to account for more than half of it.

The government’s move came in the backdrop of Prime Minister Manmohan Singh saying last November that the government would explore “ways and means” to help the airline industry. He had, however, pointed out that private sector airlines should be managed efficiently. “But if they (airlines) do get into difficulties, we have to find ways and means to help them get out of the process,” the prime minister had said then. Thereafter, top honchos of all Indian carriers had called on him and discussed the problems plaguing the industry. The decision also came in the wake of a consortium of banks approving a Rs 18,000 crore debt rejig plan for Air India. The consortium also agreed to provide fresh cash credit of Rs 2,200 crore. The banks were also in talks with Kingfisher on the issue.

The domestic carriers have been urging the government to work out ways to reduce their huge debt burden and work out a sustainable business model.

They are also seeking steps to ensure that the volatility in the rupee and rising price of aviation turbine fuel, a key cost component, do not make their operations unviable.