Banks want airline ticket sales, planes as collateral

Mumbai/New Delhi: Worried about the financial condition of loss-making airlines in India, commercial banks are asking cash-strapped carriers to pledge future ticket sales, company shares and aircraft as collateral before approving loans.
Almost all domestic carriers are in the process of raising working capital after the Centre eased on Wednesday the immediate financial concerns at the firms by allowing them to square up in six equal instalments dues of Rs2,962 crore owed to state-run oil firms, with no interest levied.
Losses at the airlines are expected to touch $2 billion (Rs9,961.9 crore at the current exchange rate) this fiscal, double the amount they lost in fiscal 2008.
Kingfisher Airlines Ltd chairman Vijay Mallya told the inter-ministerial group, or IMG, that met on Wednesday that “banks are refusing to give letters of credit even as the airlines are pledging securities,” said a government official who attended the meeting and did not wish to be named.
“The IMG is of the view that the finance ministry shall organize an interface between the airlines and the banks to ease the situation,” the official added.
Airline firms typically guarantee payments on purchases of items such as jet fuel through bank guarantees, or letters of credit.
23/10/08 P.R. Sanjai and Utpal Bhaskar/Livemint

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Categories: Indian Aviation- In General Oct 2008