Govt working on a policy package to help ailing airlines

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With Air India and Kingfisher going through their worst crises, 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 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.

Consultations would be carried out shortly by Civil Aviation Ministry, the Department of Financial Services and Banks of the Finance Ministry on the issue, the sources said.

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, they said.

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

Premier aviation consultancy firm Centre for Asia Pacific Aviation has forecast a record USD 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.

Soon thereafter, top honchos of all Indian carriers had called on him and discussed the problems in 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 and 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 the huge debt burden they are suffering from 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.

Besides, the airlines are demanding measures to ensure that fuel credit be made available without seeking additional bank guarantees or that the oil companies extend the present credit limits given to some airlines to all of them.

The Federation of Indian Airlines (FIA), a representative body, has warned that a 'bad operating climate' might compel some domestic carriers to default on servicing their debt, bringing them to the brink of closure.

While the Indian civil aviation sector has been witnessing a high passenger and cargo growth rate, all airlines, barring IndiGo, are burdened with a high rate of debt and have reported substantial losses.