Oil companies force 'cash and carry' terms on Kingfisher while letting Air India slide

Kingfisher is the largest defaulting private airline in India, and this has finally caught up with it. State owned oil marketing companies (OMCs), who claim they are owed about Rs. 1,000 Crore ($200 million), have enforced 'cash and carry' payment terms on the airline, since it has not cleared its dues, even after the extended 90 day payment terms.

Kingfisher Airlines will now have to pay upfront to buy aviation turbine fuel from oil companies to operate its regular scheduled flights. It goes without saying, this will put a major kink in the operations of the airline.

Airline officials are trying to keep its operations unaffected and claim that Kingfisher is sticking to all its schedules.

Hectic negotiations are on behind the scene. Industry sources in the oil industry indicate that with Kingfisher Airlines agreeing to the cash upfront terms, OMCs may not carry out any immediate action against the airline, though they will continue to seek ways to get the dues from the airline, and are also demanding interest on the outstanding dues, and bank guarantees.

Kingfisher Alliance partner, Jet Airways, has paid about Rs. 98 Crore, when pressed by the OMCs on January 28th. However, no action is contemplated against, the state owned National Aviation Company of India Ltd. (NACIL) which operates Air India.

NACIL is estimated to owe the OMCs about Rs. 2,500 Crore ($500 million), but no official, including the CEOs of the OMCs, would even dream of taking any step, for fear of their job. One hand of government has to scratch the back of the other.