Indian Airline NEWS: Air India reaches deal on fuel dues

Air India Ltd has agreed to partially pay off its dues to oil marketing companies and negotiated a daily payment system for the next 45 days, after which it hopes to repay in full.

The national flag carrier owed Rs. 2,300 crore to state-owned Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd in early December, when the oil firms discontinued credit to the airline on a directive from the oil ministry, as Mint reported on 10 December.

Air India has now agreed to pay a lump sum of Rs. 475 crore, or a little more than one-third of the Rs. 1,200 crore it received as equity infusion from the government this month.

The agreement was reached in a meeting of Air India chairman Arvind Jadhav, oil ministry’s additional secretary and financial adviser P.K. Sinha and officials from oil companies and the aviation ministry, said two officials present at the meeting, asking not to be named.

“They have got a relief,” one of these officials said. “They have also promised to pay some more money from receivables as and when they get it from other government departments.”

Air India also agreed to pay Rs. 13.5 crore daily for the next 45 days.

The oil companies sought a daily payment of Rs. 17.5 crore, but the airline refused. “It’s a national carrier and one of the oldest customers of the oil companies. They can’t just abandon the airline when it is going through a bad phase,” said the second official.

“The airline gets Rs. 22 crore a day from internal accruals, it can’t be asked to pay Rs. 17.5 crore straightaway.”

An Air India official said the payments will be made from the equity infusion.

“The equity is mainly to be used for repaying aircraft loans and interest, besides oil companies and aircraft vendors,” said the official, requesting anonymity.

The carrier hopes to make the rest of the payment to oil companies from the money it is due to receive from some government departments.

For example, it is yet to receive Rs. 335 crore for providing a dedicated fleet to fly the President, vice-president and Prime Minister over the past three years.

The fleet, led by Air India One, includes five jumbo jets parked in the capital for exclusive VVIP travel.

A proposal to raise the payment for this service to Rs. 800 crore a year is awaiting the finance ministry’s clearance.

The government has made a total equity infusion of Rs. 2,000 crore in the debt-laden carrier and promised another Rs. 2,000 crore for the next fiscal.

Like the national carrier, large private carriers such as Kingfisher Airlines Ltd and Jet Airways (India) Ltd have also defaulted on fuel payments in the last two calendar years, when the aviation industry was hit by the global economic slump and a steep hike in fuel prices.

NEHA JAIN

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