Air India narrowbody aircraft (Photo: Kambui [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)])
While the grounding of Jet Airways was a boom to several airlines in India, it doesn’t seem to be helping Air India that much. The airline is continuing to struggle to pay its bills and has fallen so behind that the Indian Oil Corporation (IOC) and two other fuel companies are refusing to supply fuel to the airline at several Indian airports due to outstanding bills.
Air India has been refused fuel at six Indian airports since August 22 and has to fuel planes from their departure points with enough fuel to make it to the next airport after the immediate destination since refueling isn’t a possibility.
The consortium of fuel providers have now threatened to stop fuel supplies to Air India at two more airports in India: Hyderabad and Raipur. Not having fuel services at Hyderabad could prove tricky for Air India since it operates international flights from Hyderabad. Some of them are on the longer end such as the one to Kuwait, a flight of roughly 5 hours operated on an Airbus A321 aircraft.
If Air India doesn’t pay the outstanding fuel costs by September 6 then they will be cut off from fuel at Hyderabad and Raipur. The airline has already surpassed its credit cycle of 90 days and is roughly 250 days outstanding. The airline is currently operating with its fuel suppliers on a cash basis where Air India will only receive the fuel it can pay for on a daily basis. It is unable to pay the outstanding debt in the lump sum demanded by the fuel providers so it is possible that September 6 will come and go without payment by the airline.
All of this comes at an unfortunate time for Air India. A weak Indian rupee, rising fuel costs, and the potential threat of closure of Pakistani airspace will continue to drive up costs for the airline. It is expecting some relief however by being able to pay down most of its high-interest debt through funds raised through a bond issuance soon.
This all comes at a time when the Indian government is seeking buyers of the beleaguered state airline in a privatization attempt. The Indian aviation minister allegedly says that many people around the world are interested in buying the airline. This isn’t the first time that the government has tried this. In 2018 the government failed to sell a 76 percent stake, this time they’re aiming to sell off 95 percent in hopes that total privatization would provide the best possible deal quickly.
The 76 percent sale failed due to draconian debt rules that potential buyers would have to follow, it’s no surprise that many passed at bids. The government required buyers to buy international and domestic routes together along with taking on over $5 billion in debt and maintaining the entire labor force. The new sale should hopefully have better terms.
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