Airlines in India are asking the government to accelerate the release of pending funds under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to make funds available because of high turbine fuel prices and other challenges to the aviation turbine fuel (ATF) prices and other disruptions.
The Federation of Indian Airlines (FIA) has asked the Ministry of Civil Aviation (MoCA) to intervene to make sure that eligible carriers receive the rest of the funds which were already sanctioned through the government-backed credit support scheme.
Some of our member airlines have received only some of the credit sanctioned to them under ECLGS 5.0, the industry body said. In a few cases the flow of the remaining money has been delayed in some instances because of hesitation among participating lending institutions, the FIA says.
So now the federation has asked the Civil Aviation Ministry to provide guidance and reassurance to banks so that the funds that are still pending can be released without further delay.
The FIA has specifically asked for the release of the first tranche under ECLGS 5.0. Access to sanctioned credit would allow airlines to meet immediate operational and working capital needs, it added. The additional liquidity could also help carriers to continue providing regular services and to support air connectivity across India when the aviation industry is under high costs.
Rising ATF prices add to airline cost pressures.
Fuel remains one of the largest operating expenses for airlines and so movements in ATF prices are of greatest concern for the sector. Rising aviation fuel costs can have a negative impact on airline margins and cash flow, in particular for carriers who have limited financial flexibility.
FIA's appeal comes at a time of many challenges for airlines. The federation has highlighted the impact of the ongoing West Asia conflict, airspace restrictions and flight diversions, rupee depreciation and rising operating expenses.
All of this has impacted airlines' liquidity in different forms, it said.
Flight diversions and changes to established routes can increase fuel consumption, crew costs and aircraft utilisation expenses. Currency movements can also increase the cost of components, aircraft-related payments and other services that are tied to foreign currencies. Combined, these pressures can make working capital more important for airlines looking to remain on track.
What is ECLGS 5.0?
ECLGS 5.0 is a government-backed credit guarantee for businesses that are under risk of external shocks. This guarantee allows participating lenders to extend credit but without the risk of loss in loans.
The scheme is implemented by the National Credit Guarantee Trustee Company (NCGTC). It is applicable to eligible MSMEs, non-MSME businesses and scheduled passenger airlines. ECLGS 5.0 builds on the earlier Emergency Credit Line Guarantee Scheme programmes introduced during the COVID-19 pandemic.
The goal is to improve liquidity, business continuity and employment continuity during a period of financial stress. For airlines, having more working capital is critically important at the moment because carriers have big fixed and variable operating costs, even if revenues are disrupted.
Airlines Seek Faster Disbursement
The FIA has said that the funds sought are not new financial commitments but amounts already sanctioned for eligible airlines. The industry's request is for the actual disbursement of those approved funds.
The federation has asked the Civil Aviation Ministry to work with participating lenders and provide the necessary clarity to address concerns that could be holding up the release of credit. “Negligible delays would make it harder for airlines to address immediate cash-flow needs,” the airline said.
The issue also shows the financial sensitivity of India's aviation sector to external shocks. Airlines operate in an environment where fuel prices, exchange rates, geopolitical developments, airspace restrictions and passenger demand can change rapidly. Working capital can help carriers absorb some of these short-term pressures while continuing scheduled operations.
With ATF prices still a major challenge and geopolitical disruptions affecting flight operations, the FIA has asked for immediate assistance in the disbursement of ECLGS 5.0 payments.
The industry is convinced that quicker access to sanctioned funds will improve the liquidity status of eligible airlines and in turn make them able to remain operational through those times when the cost pressures are increasing.
The present request now comes up to the Civil Aviation Ministry and the lenders for consideration of how quickly the current amounts can be released. For airlines in the midst of rising expenses and disruptions, early access to already sanctioned credits could help provide additional working capital support as the sector works in the current operating environment.
