Loans, loan guarantees and support for corporate bond market by the government or the central bank either directly to the airline or to commercial banks are required.
FICCI said it is likely that banks may be reluctant to extend credit to airlines in the present situation due to absence of guarantees. The corporate bond market is a vital source of cash but the eligibility of corporate bonds support needs to be extended by the central bank and guaranteed by the government to provide access for a wider range of companies.
“The aviation industry is facing a crisis of unimaginable proportion due to the impact of COVID-19 pandemic. With prolonged travel restrictions in place around the world, one of the major challenges faced by the aviation industry is a massive plunge in cash reserves as fleets remain grounded for almost a month now.” Anand Stanley, Chairman of FICCI Civil Aviation Committee, said in a letter to Civil Aviation Secretary Pradeep Singh Kharola that many airline companies are on the brink of bankruptcy. “It is imperative to strengthen India’s domestic aviation sector which is the backbone of industrial and tourism development.” Stanley said the liquidity position of all airlines will be benefited if the interest-free unsecured credit period for payment of fuel charges to oil marketing companies is enhanced to 180 days from the current 21 days.
Besides, it is recommended that rebates on payroll taxes paid to date in the year 2020 and an extension of payment terms for the rest of the year 2020 along with a temporary waiver of ticket taxes and other government-imposed levies may be considered.
Aviation Turbine Fuel (ATF) may be brought under the ambit of Goods and Services Tax (GST) as the cost of ATF constitutes about 40 per cent of an airline’s total operational cost. Currently, ATF attracts excise duty at the rate of 11 per cent and value added tax which varies from state to state up to 30 per cent.
“Airline companies may be allowed to take input credit of GST paid on ATF resulting in reduction in the cost of operation,” wrote Stanley.
FICCI also called for 100 per cent waiver on air navigation service charges to the Airports Authority of India for the next six months.
“The government may immediately provide direct cash support to Indian carriers so that airlines can meet their fixed costs, at least for the period where loss of revenues and liquidity is directly attributable to the government’s directive to cease operation.” The industry body also called for similar concessions for maintenance, repair and overall (MRO) operators, airport companies, aviation finance and leasing companies besides cargo airlines to ensure that Indian aviation sector remains in good, sustainable condition and sound health.