Home >Companies >News >OMCs stop fuel supply to Air India at six airports over non-payment of dues
'Our financial performance however this fiscal is very good and we are moving towards a healthy operating profit,' says the airline's spokesperson (MINT_PRINT)
'Our financial performance however this fiscal is very good and we are moving towards a healthy operating profit,' says the airline's spokesperson (MINT_PRINT)

OMCs stop fuel supply to Air India at six airports over non-payment of dues

  • In absence of financial support, Air India cannot handle huge debt service liabilities, said an airline spokesperson
  • The airports where the fuel supply was stopped are Cochin, Visakhapatnam, Mohali, Ranchi, Pune and Mohali

New Delhi: Cash strapped Air India Ltd. stares at a turbulent future as oil marketing companies (OMCs) on Thursday stopped fuel supplies at six tier two airports -- Cochin, Pune, Patna, Ranchi, Mohali, and Visakhapatnam -- due to non payment of dues.

According to a source, OMCs decided to restrict fuel supplies to the national carrier after the airline failed to clear its dues, even after repeated reminders during the last couple of weeks.

OMCs often extend a credit period of 90 days to its customers. However, Air India's credit had run over 200 days, the person said requesting anonymity.

Air India has often delayed payment of dues to OMCs in the past. Oil companies have also temporarily stopped fuel supply to the national carrier but resumed services after the airline paid back its dues.

"In the absence of equity support Air India cannot handle the huge debt service liabilities. Our financial performance however this fiscal is very good and we are moving towards a healthy operating profit," said an Air India spokesperson emphasizing that the airline, despite its legacy issues, is performing very well.

Air India currently has over 55,000-crore debt. The government had in February 2019 approved creation of special purpose vehicle (SPV), Air India Asset Holding Ltd (AIAHL), to house 29,464-crore debt of the airline as well as its non-core assets, painting and artefacts and other non-operational assets.

With massive outlay of cash on debt servicing, the national carrier often finds itself in short term cash crunch, which has in the past led it to delay payment to vendors.

The cash-strapped national carrier's plans to raise funds to the tune of 7,000 crore from bond sale earlier this year didn't materialise.

However, the ruling Narendra Modi-led government is hoping to privatise the national carrier in the coming months. The government had in June 2019 announced that its plans to sell debt-laden state-run carrier were still on track for 2019-2020, after it failed in its attempt to sell a 76% stake in airline during 2018-19 due to a lack of interest from bidders.

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