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Air India says to clear dues to oil cos on Friday

Reuters
Feb 03, 2012 at 01:29am IST

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New Delhi: Air India has settled a "major portion" of dues owed to state-run oil marketing companies and will pay the remainder on Friday, a spokesman for the ailing national carrier said on Thursday.

The oil marketing firms had earlier threatened to halt fuel supplies to Air India, reeling under a debt pile of $4 billion, from Friday for non-payment of dues.

"We made some payment yesterday, some even today. We are well within the credit limit of oil marketing companies," the spokesman, who declined to be named, told.

Air India says to clear dues to oil cos on Friday

The oil marketing firms had earlier threatened to halt fuel supplies to Air India which is reeling under a debt pile of $4 billion.

Earlier, a source at one of the state refiners with direct knowledge of the developments said Air India owes more than 47 billion rupees to Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp.

The airline, banking on government support to survive, has put itself under cash-and-carry mode since January 24, but is yet to clear previous dues, the source said.

"How can we continue to sell to them? We are incapable of extending further credit," the source said.

Finances of Indian state refiners are already under pressure for selling diesel, kerosone, and cooking gas at government-fixed cheaper rates.

India's airline companies, on course to lose $3 billion for the year ending in March, have struggled with low fares, high jet fuel prices and massive competition. Five out of six major carriers in India are loss-making.

Airlines received some breather on Wednesday after state refiners cut jet fuel prices by up to 3.1 per cent. Jet fuel in the country is still about 55-60 per cent costlier than the global average.

Lenders to Air India are still undecided how to restructure its massive debt, as they are reluctant to accept equity in the airline and want the government to infuse funds first.

Another loss-making Indian carrier, Kingfisher Airlines, had last year given its lenders a near 25 per cent stake as part of its debt restructuring. It is now in talks with Hong Kong-based distressed debt firm SC Lowy Financial for a possible investment.

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