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Rediff.com  » Business » AI gets an extra month's credit to pay ATF dues

AI gets an extra month's credit to pay ATF dues

August 10, 2009 10:03 IST

An Air India aircraft.Coming as a relief for cash-strapped Air India, the Union petroleum ministry has approved a three-month credit period to oil marketing companies for payment of its aviation turbine fuel dues.

Currently, OMCs provide AI a two-month credit. "There was a request from the committee of secretaries to extend the credit on ATF to three months from the existing two months to help Air India. The ministry has agreed to it," said a senior petroleum ministry official. The assistance was sought by Air India last month during a presentation to the CoS, which is headed by Cabinet secretary K M Chandrasekhar.

The rise in ATF prices, which constitute about 40 per cent of an airline's operating cost, has been exerting continuous pressure on domestic carriers, including AI.

Domestic airlines are estimated to have lost $2 billion in 2008-09 on high ATF prices and low passenger traffic. ATF prices had touched a peak of Rs 71,028 a kilolitre (in Delhi) in August last year. Prices fell to Rs 27,106 a kl in March this year but have again moved up to Rs 36,922 in line with crude prices. The Indian basket of crude has averaged $72.81 a barrel in the month so far, up 12.3 per cent from the July average of $64.83.

As of August 6, the Indian basket stood at $73.70 a barrel.

As a result of rising losses, most airlines have not been able to make timely payments to OMCs for ATF. However, of late, airlines have been rationalising capacity to increase operational efficiency and contain mounting losses.

In July, civil aviation minister Praful Patel informed Parliament that AI is estimated to have suffered a loss of around Rs 5,000 crore (Rs 50 billion) in 2008-09 because of operating losses, high ATF prices and debt servicing.

Image: An Air India aircraft

Ajay Modi in New Delhi
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