Sign in Subscribe
Airlines

Air India Faces Jet Fuel Supply Threat from State-Oil Firms

Strategic Insights

— 1 min read

Air India's cash struggles have prompted state-owned oil companies to threaten a stop in jet fuel supplies after the airline repeatedly defaulted on payments. The national carrier owes Indian Oil Corp (IOC) around Rs 1,900 crore and has outstanding bills with Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL). Air India's daily fuel purchases amount to Rs 18.5 crore, but it pays only Rs 13.5 crore, prompting oil firms to reconsider subsidized rates.

Key Takeaways:

  • Air India owes Indian Oil Corp (IOC) approximately Rs 1,900 crore (US$4421 million) for jet fuel supplies.
  • The national carrier owes Bharat Petroleum Corp Ltd (BPCL) over Rs 300 crore for outstanding bills.
  • Air India buys jet fuel worth Rs 18.5 crore per day from state oil firms but pays only Rs 13.5 crore.
  • Oil companies incur huge losses selling diesel, domestic LPG, and kerosene at subsidized rates and expect similar treatment for aviation turbine fuel (ATF) to be unacceptable.
  • Private airlines, such as Jet Airways and Kingfisher Airlines, have provided bank guarantees to cover ATF purchases, which Air India is not considering.
  • Air India is discussing payment arrangements only for future ATF purchases, with no clear plan to clear past outstanding dues.

Statistics:

  • Rs 1,900 crore (US$4421 million): Air India's outstanding debt to Indian Oil Corp (IOC) for jet fuel supplies.
  • Rs 300 crore: Air India's outstanding bill with Bharat Petroleum Corp Ltd (BPCL).
  • Rs 18.5 crore: Daily jet fuel purchases by Air India from state oil firms.
  • Rs 13.5 crore: Daily payment made by Air India for jet fuel supplies.
  • A 90-day credit period: Oil companies' billing cycle for ATF sales.
  • Rs 1,600-1,800 per kilolitre: Discount given to private airlines on ATF purchases.
  • Rs 3,600 per kl: Discount including finance charges for 90-day credit period.
  • Rs 5,000 per kl: Maximum discount Air India is seeking for ATF purchases.

Sources:

  • "Indian state-owned oil companies threaten to stop jet fuel supplies to Air India" by Asia Pulse.
  • "Air India owes Rs 1900 cr to IOC, Rs 300 cr to BPCL" by PTI.

Read more