NEWS| Airlines seek $1 bn bailout

The global credit meltdown has hit home and how. India’s beleaguered airline sector has become the first industry to seek an official bailout from the government.
The Federation of Indian Airlines (FIA) has asked for a $1 billion (about Rs 5,000 crore) interest free loan from the government to tide over the current crisis in addition to many other fiscal sops and easing of regulatory measures.

FIA, whose members include Air India, Go Airlines, IndigGo, Jet Airways, Kingfisher Airlines, Paramount Airways & Spicejet, wants a moratorium of three years on the repayment of loan.

A fiercely competitive market, slowing passenger traffic, rising costs and the current liquidity crunch has brought the industry to a stage where it feels that if a bailout package is not on the cards then it would need to substantially downsize.
Simply put, many an airline will be grounded which doesn’t sound implausible considering that the $6-billion (Rs 30,000-crore ) industry is expecting losses to mount to $2-billion (Rs 10,000 crore) this year.

When asked if Kingfisher Airlines had approached the government for a bailout package and for help till the company was able to raise money from the market, Vijay Mallya, chairman of the company, said, “It was part of the presentation made to PM by FIA.”

In a presentation made to the Prime Minister’s Office, the FIA has asked for the following:
Reduction in aviation turbine fuel (ATF) price to global levels.

* Reduction in landing and navigation charges.
* Alteration in route-disbursal guidelines.
* Self-handling to optimize the cost structure and quality of service.
* Indian carriers’ argument is that there is precedent for such a bailout both in India and abroad. After 9/11, the US airline industry was given $5-billion in cash and another $10-billion in loan guarantees.

Most Indian carriers have been trying to raise money the past few months without much success.
11/10/08 Economic Times