After DIAL, Mumbai airport now asks carriers for bank guarantees

After DIAL, Mumbai airport now asks carriers for bank guarantees
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First Published: Tue, Nov 24 2009. 10 44 PM IST

Safeguard measure: A file photo of passengers at the Mumbai international airport. Mial’s move comes after some domestic carriers defaulted on payments to vendors since last year, when losses jumped 4
Safeguard measure: A file photo of passengers at the Mumbai international airport. Mial’s move comes after some domestic carriers defaulted on payments to vendors since last year, when losses jumped 4
Updated: Tue, Nov 24 2009. 10 44 PM IST
New Delhi: To guard against defaults by airlines, the operator of India’s busiest airport at Mumbai has asked all carriers to provide bank guarantees to cover payments by the end of this month.
The move, already enforced by Delhi International Airport Pvt. Ltd (DIAL), comes after some domestic carriers defaulted on payments to vendors since last year, when losses jumped 44%.
Safeguard measure: A file photo of passengers at the Mumbai international airport. Mial’s move comes after some domestic carriers defaulted on payments to vendors since last year, when losses jumped 44%. Prasad Gori / HT
Local airline firms lost Rs8,557.37 crore in the fiscal year ended 31 March, making it the worst year on record for an industry beset by high costs, excess capacity and a slump in passenger traffic.
A GVK Power and Infrastructure Ltd-led consortium, which runs the Mumbai International Airport Pvt. Ltd (Mial), has asked the airlines in a letter to increase their bank guarantees. Mint has reviewed a copy of the letter issued on 20 October.
The carriers are now required to maintain a security deposit with Mial via bank guarantees equal to two months of aeronautical billing and six months of non-aeronautical billing, the letter said.
The airlines typically provide a two-month security deposit for aeronautical charges such as landing, parking and navigation fees. After the new directive, they will be required to also provide bank guarantees for all non-aeronautical charges such as rentals for airlines counters, hangars, etc.
The local and international airline firms together owe Mial around Rs180-190 crore, a Mumbai airport official said. He spoke on condition of anonymity, citing the sensitive nature of the matter.
Payments by domestic carriers are irregular, the official said. “You have to constantly nudge them.”
The top three carriers by market share in India also top the outstanding dues list, the official said.
Kingfisher Airlines Ltd, India’s second largest private airline by passengers, owes Rs30-40 crore in dues while state-run Air India owes the airport at least Rs90 crore. Jet Airways (India) Ltd owes another Rs20-30 crore. Foreign airlines, said the official, have largely kept to their payment schedules.
A Kingfisher spokesman said the airline does not “discuss its relationships with suppliers in the public domain”.
A Jet Airways official said the airline has had issues with payments with airport operators in “the last two months” owing to strained funds due to a strike by pilots at the airline.
“We have explained to the airports the same issues and everything will be cleared by January,” this official said but declined to be named.
At the Delhi airport, DIAL has already tightened payment norms for airlines. “In our case, it’s part of standard leasing practice, six months for lease rentals,” said a DIAL executive, who also spoke on condition of anonymity. “We have not been strict so far but now we are trying to enforce the payment of aeronautical billing for two months, especially considering the default situation of Kingfisher.”
The official also said that outstanding dues for the GMR Infrastructure Ltd-run Delhi and Hyedrabad airports stand at Rs60 crore for Kingfisher Airlines alone.
Some carriers are opposing the move.
“Why penalize everyone? It will unnecessarily block our money, especially when the cash flows are restrained,” a Mumbai-based airline official whose airline has not defaulted said on condition of anonymity.
tarun.s@livemint.com
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First Published: Tue, Nov 24 2009. 10 44 PM IST