Airlines face tough challenges as debts rise and loans suffer

Published on : Saturday, August 29, 2020

 Airlines are in need of capital, but banks are apprehensive about funding. When the world is busy fighting virus infection, businesses are struggling to survive amidst uncertain financial conditions. Debts are mounting, and meeting the need of daily expenses is now a challenge for most of the airlines. Indian airlines are expected to experience consolidated losses of $6.0-6.5 billion in FY2021.

Insufficient guarantee and poor cash flows are evolving as key challenges for airlines in need of loan or waiting for loan- restricting after the loan moratorium ends on 31 August, stated by the bankers and airline executives.

The Reserve Bank of India (RBI) has appointed a five-member panel to submit to analyse Covid-19 related stress accounts by September 6.  Airlines at the moment are in desperate need for working capital, but bankers ready to offer support.

Banks need companies to bring fresh equity thought an airline industry executive. However, in the present condition, airlines companies are taking longer to revive in comparison to other sectors owing to new norms and regulations and hence adding fresh equity will not happen immediately but will take time, he added further.

InterGlobe Aviation Ltd, that run’s one of the India’s largest airline IndiGo, recently stated that they will arrange up to 4,000 crore ($533.70 million) by selling shares to institutional investors. But, this is not the case with most airlines and owing to low travel movement; companies are depending on banking funds for survival.

Asset reduction is one of the key ways to raise funds, opined an industry personnel, as closure of prominent brands like Jet Airways and Kingfisher Airlines in past forced the banks to suffer huge debts in spite of offering help, and this created a liquidity issue in the market which made the present situation grim and financial support more apprehensive in this crisis moment.

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