Airlines need brave lenders
Since the proof of the pudding is in the eating, one will have to wait to see how helpful is the lifeline thrown by the government to cash-strapped, loss-making airlines. The government has opened a one-year window for external commercial borrowings of up to $1 billion, with an individual airline limit of $300 million, for working capital requirements. In normal circumstances, the ECB route is preferred because it is a quicker and cheaper way of getting loans. But these are not normal times. Almost all airlines are running losses in five digits. The overall debt of the domestic airlines is `70,000 crore, of which Air India’s is `40,000 crore. The lenders would have to be very brave, with strong appetites for risk, to lend to such clients, especially since many of them owe crores to the Indian banks. It remains to be seen how many airlines can really avail of this helpline.
It would have been so much better if the government had permitted foreign direct investment in domestic airlines, a move being scuttled by one or two airlines which have political clout and fear competition. This is a sorry state of affairs.
Equally distressing is the helpline that permitted airlines to import aviation turbine fuel (ATF). It sounds like a great idea as ATF is 45 per cent of the total cost of running an airline because of high state taxes. It would have been easier for the states to pare their taxes. But then, who likes to give away money?
Post new comment