Airlines to pay dues in six monthly instalments by March 2009


New Delhi : India’s airlines will clear their outstanding dues to oil companies in six monthly instalments and will be given an extended credit limit of 90 days to purchase the current requirement of aviation fuel, it was decided here Wednesday.

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The decision was taken at a meeting of the heads of various airlines and oil companies that was presided over by Civil Aviation Minister Praful Patel and Petroleum Minister Murli Deora to discuss payment of dues to oil companies.

“Cumulatively, the dues of the airlines industry to the oil companies are about Rs.2,500-2,800 crore (Rs.25-Rs.28 billion). We have decided that this shall be cleared by the airlines in six-monthly instalments by March 2009,” Patel told reporters after the meeting.

He added that for current uplift of aviation turbine fuel (ATF), oil companies will extend a credit limit of 90 days to all airlines. Besides, oil companies will start revising ATF prices every fortnight, replacing the current monthly revision.

“After the credit limit ends, airlines will have to furnish guarantees and other mechanism to demonstrate that they will be able to pay oil companies,” said Patel.

Kingfisher Airlines chairman and chief executive Vijay Mallya, Jet Airways executive director S.K. Dutta and Air India chairman Raghu Menon were among those present. So were the chiefs of state-run oil firms – Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum.

The meeting was necessitated as some airlines have defaulted on payments for the ATF they bought at the end of their 60-day credit period.

Patel added that he had “cautioned” airlines that they would have to take more responsibility if they wanted support.

Deora said Air India chairman had assured that there would not be any laying off of employees.

Menon earlier made an offer of leave-without-pay for 15,000 employees.

Jet Airways had planned to lay-off 1,900 employees, but reversed its decision in the face of wide-spread protests and political criticism.

The Indian airline industry has been beset by financial worries – a snowballing effect of months of high ATF prices and then the global liquidity crisis.

“The airline industry which was growing at 25-30 percent has witnessed a negative growth in recent months,” said Patel.

This has affected the Indian carriers’ cash-flow and their ability to clear the dues to the oil companies, he added.

Shares of the private airlines soared as reports about the reprieve from the oil ministry came out.