Govt refuses to bail out domestic carriers

Govt refuses to bail out domestic carriers


New Delhi: The government on Thursday refused to bail out ailing airlines facing mounting losses but said it would extend the credit period for the cash-starved carriers to pay their fuel bills.

Indian airlines had sought a bailout package worth Rs47.50 billion ($1 billion) to survive in the face of shrinking traffic and high fuel costs.

However Civil Aviation Minister Praful Patel said no bailout was on offer but airlines would get more time to pay their fuel bills.

“No financial relief has been given to the private airlines," he told parliament.

But “the credit period for current purchases of fuel has been increased to 90 days from existing 60 days," he said.

Last week, Patel said the sector was going through its “worst-ever phase."

Domestic airlines jointly owe $630 million to state-held petroleum firms, according to the government.

Fuel amounts to around 40% of an airline’s operational costs.

The sector posted a combined loss of $938 million in the fiscal year to March 2008 and analysts expect losses to touch $2 billion this year.

Left-wing members of parliament have strongly opposed state handouts to private- and government-owned airlines.

Last week India’s largest domestic airline, Jet Airways, struck an alliance with arch-rival Kingfisher Airlines involving code-sharing, ground-handling and route rationalisation to avert collapse.

Airlines hiked fares to cope with higher fuel costs but this prompted a fall in passenger traffic driving them deeper into the red.

Passenger growth has slowed from 33% in 2007 to 7.5% in the first half of the year and turned negative in August when 17% fewer people flew compared with a year earlier.