Vijay Mallya-owned Kingfisher Airlines' tryst with bad news continues. Hindustan Petroleum Corporation Limited (HPCL), to which Kingfisher Airlines (KFA) owed crores in jet fuel dues, has encashed the bank guarantee provided by the airline.
Kingfisher’s bank guarantee to HPCL was worth about Rs 434 crore. Till September 2012, the airline owed Rs 341 crore to HPCL in fuel dues. A senior HPCL executive at HPCL's finance department said the company has already encashed the bank guarantee.
"With aviation regulator suspending KFA's flying licence, we decided we had to make use of the bank guarantee provided to us by the airline. We have been able to cover the dues," the senior executive said.
On Tuesday, the HPCL stock closed at Rs 300.95, up 0.33 per cent.
Last month, B Mukherjee, director (finance), HPCL, told Business Standard Kigfisher owed the company around Rs 341 crore, adding if Kingfisher failed to pay the dues, HPCL had the option of encashing the bank guarantee.
HPCL is Kingfisher's largest supplier of aviation fuel. In March, HPCL had snapped fuel supplies to Kingfisher, owing to non-payment of dues. While IndianOil's supplies to Kingfisher Airlines are negligible, Bharat Petroleum Corporation Ltd (BPCL) sells fuel to the airline on a cash-and-carry basis at select airports.
Airlines say rising fuel cost and capital costs, coupled with competition-induced price wars have led to huge accumulated losses and mounting debts. Till last month, Air India owed about Rs 300 crore each to BPCL and HPCL. It also owed Rs 1,250 crore IndianOil, according to officials from these companies. Air India hasn't provided bank guarantees to any of the oil marketing companies.
“Air India is unable to pay even after a 90-day credit period. As of September, it owed us about Rs 400 crore,” a BPCL official said.
Air India in total owes Rs 2,360 crore to IndianOil. This due is for a period of over two years and includes outstanding interest amount too.
After the government infused Rs 6,750 crore in Air India early this year, the company was able to pay off Rs 650 crore in dues to IOC. This April, the government announced it would infuse additional funds into the airline to the tune of Rs 30,000 crore till over the next nine years.
So far, Air India owes over Rs 3,060 crore 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.
