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Airlines are unlikely to benefit from the government's decision to permit the loss-making carriers to access external commercial borrowings (ECBs).
"Who is going to lend to them when even the domestic banks are not lending? It is like selecting a player for the Indian test team when he is not even fit to play in the Ranji Trophy," said the chairman of a large bank. Another banker said that local lenders, comprising mainly public sector players, are demanding that airline promoters chip in with equity of Rs 4,000-5,000 crore before additional loan facilities are offered.
The reluctance of lenders could be understood from the fact that the accumulated losses and debt of big players like Jet, Air India, Kingfisher and SpiceJet were Rs 1.18 lakh crore on September 30, 2011 as per a TOI report.
A bank chairman said that RBI would frown on banks which arrange ECBs for airlines. While AI's immediate cash requirement is close to Rs 7,000 crore to pay vendors and salaries, Kingfisher requires anywhere up to Rs 1,000-1,500 crore to stay afloat. Even Jet Airways had recently sought government help in getting a Rs 1,000-crore working capital loan.
Both AI and Kingfisher are facing survival issues with the Maharaja getting some relief after Mukherjee allocated Rs 4,000 crore for it over the next fiscal.
Centre for Asia Pacific Aviation (India) head Kapil Kaul also does not expect the ECB route to bring any relief to airlines. "This may not be such good news as one needs a good credit rating and a balance sheet," he said.
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