Directly imported fuel to turbocharge airlines

Rs 18,000 cr of Air India debt recast cleared, with Rs 7,400 crore to be raised through bonds

Aviation companies had a good day on Tuesday. A Group of Ministers (GoM) allowed Indian carriers to directly import Aviation Turbine Fuel (ATF) and cleared Air India’s debt restructuring plan. “The GoM has cleared the proposal to allow Indian carriers to import fuel directly. The final clearance will come from the Cabinet,” Civil Aviation Minister Ajit Singh said after the GoM meeting. Air India’s debt restructuring plan will now include raising about Rs 7,400 crore through bonds.

Aviation stocks achieved their month’s highs during the day’s trade on Tuesday, even as the Sensex fell 84 points to 17,622.

Owing to high tax on ATF and a weak rupee, all the three listed carriers have incurred huge losses this financial year.

Tax on ATF in India is the second highest in the world at 24 per cent, after 27 per cent in Bangladesh. Direct import will not attract sales tax and lead to savings of Rs 2,500 crore annually, a fourth of the airlines’ annual ATF bill of Rs 10,000 crore.

TIME TO SOAR Closing share prices on BSE in Rs
6-Feb	7-Feb	% chg
Jet Airways
298.05	341.20	14.48
Kingfisher Airlines
25.75	29.15	13.20
Spicejet
24.60	27.30	10.98
Compiled by BS Research Bureau

Banks are restructuring Rs 18,000 crore of Air India’s Rs 22,000-crore short-term debt. Of that, Rs 7,400 crore will be raised through bonds and paid to banks. The rest will be converted into long-term debt.