In a change of luck for the Indian flag carrier, Air India has had its refueling rights at six airports restored.
What is going on with Air India?
For those a little out of the loop, here is a quick summary.
As we previously reported, Air India had been a little neglectful in paying their fuel bill for nearly a year, and as such the fueling company had to cut them off. Specifically, India’s state-run oil coalition (OMC) has stopped the supply of jet fuel for Air India aircraft at:
- Cochin Airport
- Ranchi Airport
- Mohali Airport
- Patna Airport
- Vizag Airport
- Pune Airport (Yes that Pune, India with the world’s worst flight)
And just how much did Air India owe the fuel companies? Around $550 million USD according to FlyerTalk.
“Air India has a 90-day credit period, which means they have to make payment for fuel they buy today by November 21st. Air India had not been making payments and the credit period was now over 200 days,” a senior official at one of the three state-owned oil firms said, according to Indian website LiveMint.com.
So what action was left for the OMC if not to cut them off?
Air India has so far gotten around this issue by loading the aircraft with double the amount of fuel required, so the planes don’t actually need to refuel at the airports. Fortunately, many of these airports are just regional centers and Air India doesn’t operate any international routes from these hubs (that would require a lot of fuel).
Admittedly, this just kicked the problem down the road and didn’t deal with it, but at least the planes kept flying. To better understand why Air India is in this mess, we recommend you read out background article on the issue here.
What has happened now?
Just recently published in The Points Guy, it seems Air India has come to an agreement with creditors to slowly repay back the colossal amount of money it owes fuel companies. As such, companies will reopen the fuel access at these six airports.
From Saturday, Air India has agreed to pay $2.8 million USD per month to the creditors, in a special agreement negotiated by the Indian government. It is kind of ironic that Air India (owned by the government) still has to negotiate with the state-owned oil companies.
What does this mean for the carrier?
From one point of view, it is a rather interesting problem. The airline is struggling with legacy debt from its past, battling against low-cost-carriers in the domestic marketplace and facing off against Middle Eastern carriers internationally. This new payment per month is going to be brutal for an airline that is already struggling to make ends meet.
But Air India is confident that its operating margins are improving and that, with the fuel situation resolved, it will be able to slowly make its way back into the spotlight as the pride of India.
What do you think? Let us know in the comments!