BackKingfisher Airlines continues to default on payment of dues
Kingfisher Airlines continues to default on payment of dues
PremiumTurbulent times: A Kingfisher aircraft at the Delhi airport. Both IOC and BPCL have discontinued fuel sales to the airline on credit. Ramesh Pathania / Mint
New Delhi/Mumbai: India’s top ranked carrier by passengers flown in the March quarter, Kingfisher Airlines Ltd, continues to default on payments.
In the latest instance, Indian Oil Corp. Ltd (IOC) has encashed bank guarantees of around Rs65 crore provided by the airline, after a cheque for some Rs50 crore issued to the oil firm by the airline bounced last week, people familiar with the development said. It wasn’t immediately clear if the guarantee had been encashed in full or in part.
This is the first time that bank guarantees given by the airline, founded by billionaire businessman and liquor tycoon Vijay Mallya, have been encashed.
In November, state-run Airports Authority of India (AAI) which runs most of the country’s airports, had threatened to encash bank guarantees of Rs100 crore after Kingfisher fell behind on a payment of at least Rs256 crore.
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After cheques given to the authority bounced last fortnight, the carrier transferred some Rs77 crore electronically to AAI. After this payment, said an AAI board member who did not want to be named, Kingfisher’s dues for now are within the bank guarantee furnished by the carrier.
Dues to three state-run oil companies totalling to at least Rs1,000 crore, however, still remain to be paid, forcing IOC’s hand.
“The bank guarantee has been encashed," said a person familiar with the development, declining to be identified. A second person aware of the process confirmed the move.
IOC encashed the bank guarantee after Kingfisher had sought a second 10-day extension of the deadline to pay state-run IOC after missing a 10 April deadline to settle the tab for jet fuel supplied by the refiner. A first deadline of 31 March, too, was missed by the firm, as reported by Mint last month.
In October, the Union government allowed the country’s three largest carriers—National Aviation Co. of India Ltd (Nacil)-run Air India, Jet Airways (India) Ltd and Kingfisher—a period of six months to pay dues amounting to Rs2,962 crore to oil marketing firms.
Oil companies say the airlines have not met that commitment.
“When one particular (oil) company asks for payment, they (Kingfisher) shift the business to the other," said the second person quoted above. He was referring to the fact that the airline had moved most of its fuel purchases to Hindustan Petroleum Corp. Ltd (HPCL) where the airline can still buy jet fuel on credit.
The same person said the overall overdue payments of the carrier amount to about Rs129 crore for IOC, Rs488 crore for HPCL and Rs326 crore to Bharat Petroleum Corp. Ltd (BPCL).
Both IOC and BPCL have discontinued fuel sales to the airline on credit and insist on cash-and-carry purchases.
Since October, Jet Airways (India) Ltd and state-run Nacil have made part payment and owe relatively small amounts to the oil firms.
India’s airlines are struggling with declining passenger traffic in the face of an economic downturn, overcapacity and intense competition. They are estimated to have posted a combined loss of over $2 billion (Rs9,980 crore now) in the year ended 31 March.
Shares of Kingfisher fell 0.52% to Rs38.25 at close of trading on the Bombay Stock Exchange on Monday. The benchmark index rose 6.41%.
tarun.s@livemint.com
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