Air Costa extends cancellations till May 31

Air Costa had to halt operations after it failed to pay lease amount to GE Capital Aviation Services

Vijayawada-based regional airliner Air Costa, which grounded its services a fortnight ago, has started cancelling tickets booked until May 31 in a clear indication that the company is not in a position to resume the operations any time soon.

Air Costa had to halt the operations on February 28 after it failed to pay three months’ lease amount to GE Capital Aviation Services — a unit of GE Capital, from which it has leased two Embraer (EMB-190) aircraft. The company first said it has suspended the flight services only for a few days but started extending the status quo indefinitely as the negotiations with investors failed to make any quick headway.

Sources in Air Costa, however, maintained that promoters are making all efforts to bring an investor on board as soon as possible. “It will take time to resume the operations once the aircraft are grounded for more than 15 days. Pilots would be moving out and things like that,” a company official said.

The company had suspended operations for a few days in August last year owing to financial issues, which got bigger as the promoters could not bring in more equity or raise resources from new investors to meet the operational costs. “Now it is not just about meeting the operational expenses. They have to raise the resources to sustain the airline operations for a longer time,  and to do this, they need a lot of liquidity. At present, the real estate business of the promoter group is not in a position to generate that kind of liquidity,” a senior Andhra Pradesh-based entrepreneur told Business Standard.

While some sources say that the promoters were talking to an NRI businessman who was willing to invest in the airline business, the company officials, however, refused to name the potential investors.