Equity, bond lifeline for AI; airlines free to import fuel

Airline stocks soared on the Bombay Stock Exchange after the decision was announced, even as the benchmark 30-share Sensex fell 0.5%. Jet Airways closed 14.48% higher at R341.20, Kingfisher Airlines up 13.20% at R29.15 and SpiceJet up 10.98% at R27.30.

The group of ministers (GoM) headed by finance minister Pranab Mukherjee cleared Air India’s plans to raise R7,400 crore through the non-convertible debentures with coupon rates of 8.5-9%, besides an equity infusion of R6,750 crore. The government had invested R3,200 crore in Air India in 2011, taking the ailing airline’s total bailout package to R17,350 crore. The non-convertible debentures (NCDs) are likely to carry a coupon rate of 8.5-9% and financial institutions may subscribe to these bonds, sources said.

Air India, including the merged Indian Airlines, has been at the government's door for more than three years as the global civil aviation market turned rough.

The GoM also decided to allow direct jet fuel imports, a long-standing demand of airlines. Fuel is the biggest cost component of airlines, accounting for 40-45% of operating costs. State governments levy around 22% sales tax on jet fuel, making it much cheaper to buy fuel from abroad.

However, there may not

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