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Patel calls for measures to help aviation industry tide over crisis

Patel calls for measures to help aviation industry tide over crisis
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First Published: Thu, Oct 16 2008. 12 12 AM IST

Crisis time: Aircraft at the inauguration of the air show at Begumpet airport in Hyderabad on Wednesday. PTI
Crisis time: Aircraft at the inauguration of the air show at Begumpet airport in Hyderabad on Wednesday. PTI
Updated: Thu, Oct 16 2008. 12 12 AM IST
Hyderabad: Civil aviation minister Praful Patel sought a breather from banks and oil companies for the country’s beleaguered airlines, which aren’t able to raise funds as they struggle with mounting losses. He threw his weight behind the industry’s consolidation and promised other help to steer it through turbulence.
Patel, who opened a four-day civil aviation air show here on Wednesday, said he would raise problems faced by the airlines with finance minister P. Chidambaram and banks and financial institutions.
Crisis time: Aircraft at the inauguration of the air show at Begumpet airport in Hyderabad on Wednesday. PTI
“We are finding airlines complaining that banks and financial institutions are not very happy to lend to the carriers,” Patel told reporters. “This is very much top on our agenda. I am going to meet the finance minister to take up the issue. I am also planning to meet the banks and financial institutions and ask them not to put undue pressure on the airlines and to give them breathing time to tide over (the) bad patch.”
Patel said the civil aviation ministry supported airlines’ attempts to consolidate by cutting costs, reducing capacity and pruning unprofitable routes.
India’s airlines, expected to end the fiscal year with a record $2 billion (Rs9,680 crore) in losses, have found it difficult to raise money in recent years from financial institutions wary of lending and investors fretful of channelling funds to an unprofitable industry weighed down by soaring fuel prices and competition.
Jet Airways (India) Ltd, the country’s biggest carrier, has been unsuccessful in trying to raise $800 million for the last two years. While state-run National Aviation Co. of India Ltd, or Nacil, that runs Air India, has lined up a $2 billion expansion plan, Kingfisher Airlines Ltd had announced a $400 million fund-raising plan.
A senior Kingfisher Airlines executive, who spoke on condition of anonymity, said banks are not willing to lend to airlines given the losses and high cost structure.
“There is a lot of turbulence at the moment in the Indian aviation industry. Most airlines are complaining of huge cash losses including (the) national carrier and other major carriers,” the civil aviation minister said.
Holding high fuel prices responsible for the crisis faced by airlines, Patel said the high-tax regime, both at the Central and state level, had worsened the situation.
The government plans to find ways to reduce taxes on fuel at both Central and state level, ask oil companies to give breathing space to airlines in clearing dues, and also to reduce landing, parking and route navigation charges for a limited period to enable them to tide over the difficulties.
“We will also talk to financial institutions where we can ask them to help the air carriers with some more working capital arrangements,” he said.
The minister’s comments coincide with a credit crunch stemming from the global financial turmoil that the government is trying to ease by infusing fresh liquidity into the financial system. Cuts in the proportion of deposits that banks are mandated to hold in reserve with the central bank have injected an additional Rs60,000 crore into the financial system.
“There is no money in the system. Even if somebody wants to sell some equity, no one has got the money since everybody is bleeding,” said Naresh Goyal, founder and chairman of Jet Airways.
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First Published: Thu, Oct 16 2008. 12 12 AM IST