Air India cuts 12 flights due to jet-fuel bill

jet-fuel bill
     
MUMBAI -(MarketWatch)- Air India Ltd. will operate a dozen fewer flights each day until the middle of June as the national carrier is unable to make full payment for jet fuel purchases, two senior company executives said Monday. 

The airline usually operates more than 500 local and overseas flights daily.

"This schedule has been put in place since Friday and will be implemented until June 15," Kamaljeet Rattan, head of corporate communications, told Dow Jones Newswires.

Another airline executive, who didn't want to be named, said some flights to London and Tokyo have been cancelled while a few local flights have been clubbed.

Since December, oil suppliers have put Air India on a cash-and-carry basis to buy jet fuel, meaning that the airline has to pay each time it refuels its aircraft. Airlines normally have a 90-day credit period to pay their fuel bills, but oil companies refused to follow that structure with Air India after it defaulted on some payments.

Rattan said Air India pays INR160 million as its daily fuel expense but is unable to pay more, even as jet fuel prices steadily rise. He said there have been discussions with oil suppliers on the payment issue, but didn't say if they have reached an agreement.

Jet fuel is the biggest chunk of an airline's operating expenses. It currently costs INR59,602 at the Mumbai airport, up more than 41% from October.