Vijay Mallya-run Kingfisher Airlines owes state-run Hindustan Petroleum Corporation Limited (HPCL) Rs 505.53 crore in jet fuel dues, according to HPCL's annual report.
Kingfisher Airlines however, owes this due against a bank guarantee to HPCL to the tune of Rs 434 crore, says HPCL.
“If Kingfisher fails to pay our dues, we have the option of encashing the bank guarantee. But as of now we are hopeful that the entire dues will be realised,” a senior official from HPCL told Business Standard.
HPCL is Kingfisher's biggest aviation fuel supplier. This March, due to non-payment of dues, HPCL had snapped fuel supplies to Kingfisher, grounding its flights, temporarily.
While IndianOil Corporation's supplies to Kingfisher Airlines is negligible, Bharat Petroleum Corporation Limited (BPCL) sells fuel to the airline on a cash-and-carry basis at some airports.
A senior BPCL official said in case an airline fails to pay the dues, oil marketing companies can take action for recovery of dues in accordance with the mutually-agreed commercial terms between them and the airline company. Interest on the amount is recovered on overdue payments.
BPCL said its exposure to Kingfisher Airlines is nil.
Rising fuel cost and capital costs in addition to competition induced price wars have brought huge accumulated losses and mounting debts to airline companies.
Analysts said the government's nod to allow foreign airlines to buy up to 49 per cent in local airlines will help Indian airline companies which are in dire need of capital.
According to an Edelweiss Securities flash note, while Kingfisher Airlines is on the verge of bankruptcy, as of financial year 2012, Jet Airlines has accumulated around Rs 13,300 crore debt on its books. Jet's reserves and surplus has eroded to Rs 44.6 crore in FY12 from Rs 1640 crore in FY10.
In addition to Kingfisher, national carrier Air India, as of July 2012, owes about Rs 2,000 crore (Rs 20 billion) in jet fuel dues to state-run oil marketing companies without even bank guarantees.
While Air India owes about Rs 300 crore (Rs 3 billion) each to Bharat Petroleum Corp Ltd (BPCL ) and Hindustan Petroleum Corp Ltd (HPCL), the airline has to clear Rs 1,250 crore (Rs 12.5 billion) payment to Indian Oil Corp (IOC), according to officials from these companies.
Besides, there is no bank guarantee from Air India to any of the oil marketing companies.
“Air India is unable to pay even after a 90-day credit period. They owe us about Rs 300 crore without interest,” a BPCL official had told Business Standard.
Of its dues of Rs 1900 crore (Rs 19 billion) to IOC, Air India has paid about Rs 650 crore (Rs 6.5 billion) so far. "Air India had settled part of the dues. The company will pay us in tranches from the bailout package that the government has decided for the airline," a senior IOC official had said.
In April, the government announced it would infuse additional funds into the airline to the tune of Rs 30,000 crore (Rs 300 billion) till over the next nine years. An immediate infusion of Rs 6,750 crore (Rs 67.5 billion) has already been done.
Till early this year, Air India owed over Rs 4,170 crore (Rs 41.7 billion) to public sector oil companies in unpaid jet fuel bills. This February, the three oil marketing companies had snapped supplies of the fuel to Air India for failing to honour payments even after the 90-day credit period.
The matter, however, was resolved after a high-level intervention by officials from the ministries of civil aviation and oil, in which the airline agreed to pay part of the money within 48 hours.
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