Two major crises hit cash-strapped national carrier Air India on Friday. The airline had to cancel at least 20 flights throughout the country on Friday after state-run oil marketing firms refused to provide aviation turbine fuel (ATF) on

credit and demanded full and immediate payment for the ATF given daily, senior civil aviation ministry officials have confirmed.
Of these, about five flight cancellations, including of international flights (to West Asia), took place in Kerala. But there was more bad news as well for Air India with the two GMR-led consortia — managing Delhi and Hyderabad airports — announcing that both Air India and the private Kingfisher Airlines will be allowed to operate flights to and from Delhi and Hyderabad from June 1 only on a “cash and carry” basis in order to recover “significant” dues from the two airlines. Airport operators charge airlines for facilities at airports that include landing, navigation and parking charges. This means that unless Air India and Kingfisher make daily payments to the Delhi and Hyderabad airport operators for facilities availed, the flights of these two airlines could be cancelled at Delhi and Hyderabad airports from June 1. Also, the Delhi and Hyderabad airport operators are insisting that the two airlines clear their dues.
“Delhi International Airport (P) Ltd (DIAL), and GMR Hyderabad International Airport Ltd (GHIAL), in order to control the significant amount of dues recoverable from two airline companies, being Kingfisher Airlines Ltd and Air India Ltd, have announced that effective 12.01 am of Wednesday, June 1, 2011, these two airlines companies will be allowed to operate their flights from and into Delhi and Hyderabad only on cash and carry basis. The management of both these airports have had to take this decision after continued deliberations with these airline companies failed to yield payments of outstanding dues from these airlines. It is expected that these two airline companies will clear major outstanding payments owed by them to DIAL and GHIAL, to avoid inconvenience that might be caused to their passengers with effect from June 1, 2011,” GMR said in a statement.
As far as the fuel crisis is concerned, till late on Friday evening, civil aviation ministry officials said they were holding talks with the petroleum ministry and oil firms to settle the issue. The cancellations caused tremendous inconvenience to passengers. Air India may be left with no choice but to curtail flight schedules during the weekend but the civil aviation ministry said the matter “is being sorted out”.
Air India uses about 130 kilolitres of ATF every day for its operations and requires fuel worth about `18.5 crores. Civil aviation ministry sources said that till recently Air India was paying only `13 crore daily to the oil firms which was recently increased to `16 crores daily. But this did not satisfy the oil firms. “The oil firms told Air India on Friday that they should take fuel worth only `16 crore daily if they were making a payment of `16 crore. The oil firms then cut oil supply by 20 per cent to Air India at all stations across the country. Due to this, flight cancellations took place,” sources in the civil aviation ministry and Air India said. However, the Air India spokesperson was unavailable for comment on the crisis. Ministry sources said the airline owed about `1,200 crore in dues to the oil firms. Air India may now focus on acquiring fuel for international flights from abroad.
The civil aviation ministry was furious at the turn of events. Ministry sources said that it had been earlier decided in consultation with the Cabinet Secretariat and petroleum ministry that Air India would make a daily payment of `16 crore to the oil firms while taking fuel worth `18.5 crore daily. They wondered how the oil firms could take such “unilateral action” against the national carrier.
On their part the PSU oil marketing companies put forth their deteriorating financial condition as their explanation for stopping ATF on credit to Air India. “Air India owes over `2,000 crore to us. There is a limit to which we can keep on giving them credit. We are ourselves facing problems as the under-recoveries on the sale of diesel, LPG and kerosene are mounting. If our financial condition would have been fine then that would have been a different thing, but right now we are ourselves in a tight position,” said a senior official from one of the oil companies. The losses of the PSU oil marketing companies on sales of diesel, kerosene, petrol and LPG are threatening to touch `2 lakh crore this fiscal. ATF is sold at market price. The official said the oil marketing companies are providing ATF to airlines on cash and carry basis. “We can supply them whatever is their demand but they will have to pay for that,” he added. The official said other private airlines have given bank guarantees to oil marketing companies.