Airlines' funding to be closely watched

The civil aviation ministry is all set to form a set of guidelines, which will make it mandatory for companies to disclose the funding for airlines and aircraft they plan to acquire or lease.

The move has a twin purpose: finding out the source of airlines' funds and ensuring that carriers are operating on sound financial.

Ministry sources said airlines would be required to furnish funding details before inducting new aircraft into their fleet. They added that if the government found the funding pattern inadequate or dubious, airlines would not be allowed to acquire or lease aircraft.

"The guidelines will allow the government to keep a close watch on how the airlines are funded and to see whether an airline has enough funds to sustain its operations or not," said a senior civil aviation ministry official.

Carriers will also be required to file their cash flow statements every quarter, giving details of the last quarter's cash flow and how they expect operations to fare in the next quarter.

Besides, the government will seek carriers' fleet acquisition plans and weigh their infrastructure at various airports before giving them permission to start operations.

The move comes on the heels of the government planning entry barriers for new carriers, including a higher paid-up equity, prior approval of business plan and linking of fleet sizes to the equity of the companies.

In addition, licence applications for airlines will take longer to process, as the government wants to evaluate the business viability of the companies involved. This is aimed at ensuring that only sound players enter the sector.