Debt-ridden airlines get relief from RBI

New Delhi: Finally, airlines have some relief from the Reserve Bank of India (RBI). The central bank has said that restructured loans of airlines will no longer be treated as non-performing assets.
Most of the airlines are on the verge of default in repaying loans to banks. In case of defaults, airlines will not be able to raise money from the markets. Together the big three of Indian skies - Air India, Jet and Kingfisher - have debts to the tune of Rs 60,000 crore, which they were finding hard to repay due to the recent downturn in the global aviation industry. "So, the RBI's decision has given a fresh lease of life to the domestic carriers," said a senior aviation ministry official.
With RBI allowing banks to restructure airline debts on a case-to-case basis, the sector is expected to get several benefits. "Airlines can get a moratorium on repaying loans without being labelled NPAs. Such a move will also ease off pressure on banks from spoiling their balance sheets due to the huge exposure to airlines, while giving them relief for repayment," said the official.
AI has loans of about Rs 40,000 crore (for aircraft purchase and working capital) and Jet-Kingfisher between them owe about Rs 20,000 crore. While Bank of India's exposure to aviation sector is Rs 4,000 crore, SBI has lent about Rs 3,000 crore. Airlines like AI have taken working capital loans on which hefty interest is paid every quarter. AI has never defaulted on interest payment while Kingfisher has sought a moratorium for two to three years. AI has said that the interest payment is proving to be its biggest cash outflow the biggest challenge.
22/09/10 Times of India

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Categories: Indian Aviation- In General Sep 2010