Air India budget allocation increased to $1.6 billion

In a bid to strengthen the financial position of Air India, the Indian government yesterday substantially increased the allocation for its holding company, National Aviation Company of India Ltd. (NACIL), by about Rs 4,029 crore (approx $806 million) in the interim Budget 2009-2010. Almost the entire increase in allocation for the Ministry of Civil Aviation (MoCA) was cornered by NACIL, with the airline being earmarked Rs 8,165.64 crore ($1.633 billion), up against the revised estimate of Rs 4,136.89 crore for 2008-2009.

MoCA received a total allocation of Rs 12,164.76 crore, compared with the revised 2008-2009 estimate of Rs 7,490.06 crore, a hike of almost Rs 4,675 crore. The move came in the backdrop of Air India seeking enhancement of its equity and a soft loan to meet the growing expenditure on its ongoing aircraft acquisition programme of buying 111 planes.

A provision of Rs four crore was also made, for salaries and other administrative infrastructure was also made in the non-plan budgetary allocation of the Ministry for the newly-created Airport Economic Regulatory Authority (AERA), whose Chairman and two members are yet to be appointed.

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Oil companies force 'cash and carry' terms on Kingfisher while letting Air India slide

Kingfisher is the largest defaulting private airline in India, and this has finally caught up with it. State owned oil marketing companies (OMCs), who claim they are owed about Rs. 1,000 Crore ($200 million), have enforced 'cash and carry' payment terms on the airline, since it has not cleared its dues, even after the extended 90 day payment terms.

Kingfisher Airlines will now have to pay upfront to buy aviation turbine fuel from oil companies to operate its regular scheduled flights. It goes without saying, this will put a major kink in the operations of the airline.

Airline officials are trying to keep its operations unaffected and claim that Kingfisher is sticking to all its schedules.

Hectic negotiations are on behind the scene. Industry sources in the oil industry indicate that with Kingfisher Airlines agreeing to the cash upfront terms, OMCs may not carry out any immediate action against the airline, though they will continue to seek ways to get the dues from the airline, and are also demanding interest on the outstanding dues, and bank guarantees.

Kingfisher Alliance partner, Jet Airways, has paid about Rs. 98 Crore, when pressed by the OMCs on January 28th. However, no action is contemplated against, the state owned National Aviation Company of India Ltd. (NACIL) which operates Air India.

NACIL is estimated to owe the OMCs about Rs. 2,500 Crore ($500 million), but no official, including the CEOs of the OMCs, would even dream of taking any step, for fear of their job. One hand of government has to scratch the back of the other.

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