In what came as a big breather, cash-strapped airlines on Wednesday got from the government a relief package that gives them six more months to pay their outstanding fuel bills, three months? credit tenure and a promise to set fuel prices fortnightly.

In a crucial meeting, the government decided to give airline companies time till March 2009 to pay their fuel bills outstanding of Rs 2,962 crore to the three state-owned oil marketing companies (OMCs). The carriers have to clear the bills in six equated monthly installments.

The government also decided to give an extended credit tenure of 90 days to the airlines, against 60 days now, for fresh purchases of the aviation turbine fuel (ATF) from the oil companies. This arrangement, too, shall continue till March 2009.

The government has also decided on a fortnightly revision of ATF prices, against the monthly revision mechanism, in order to reflect the true impact of the fall in crude oil prices in the international oil market.

The decisions were taken at a meeting called by petroleum minister Murli Deora on Wednesday with civil aviation minister Praful Patel, airlines bosses and the Federation of Indian Airlines to work out ways to help the carriers stay afloat, while balancing the interests of oil firms.

The meeting also discussed Air India?s proposal to keep some employees on leave-without-pay. The proposal, sources said, drew severe criticism in the meeting.

Officials disclosed that Deora criticised Air India chief Raghu Menon?s proposals during the meeting and even cut Menon short when he started talking on the need to ?rationalise? the workforce to trim the losses from negative growth and high fuel cost. ?There should not be any layoffs. Why are you raising it now,? sources quoted Deora as telling Menon.

The oil minister then also passed on his message of ?no-job cuts? to the other participants?Kingfisher chairman Vijay Mallya and Jet Airways executive director Saroj Dutta. Patel also said airlines should ensure that jobs are protected. ?The industry should not take such steps and expect government support,? sources quoted him as saying.

Wednesday?s measures came as a big relief for the airlines, which had a stand-off with the oil companies over payment of ATF bills. The oil companies, which too have been facing tough times, had threatened to terminate fuel supplies to the airlines for non-payment of dues.

?One of the major issues was the dues that the airlines owed to oil public sector units, which needed to be resolved? and it was becoming a vexed problem,? Patel said. Commenting on the high ATF prices in India, Patel said, ?I have conveyed it to the finance ministry. I have met Chidambaram and we have had a word about the taxes imposed on the aviation sector? It is high time that we reduced the tax (on ATF) and rationalised it. This demand is not new, I myself have been pressing for it for four years now.?

The country?s airlines have a total outstanding bill of Rs 2,926 crore, of which Rs 2,131 crore is in default—beyond the credit period. Jet Airways has an outstanding of Rs1,576 crore, of which Rs321 crore is beyond the credit period. Kingfisher Airlines has a due of Rs 983 crore, of which Rs 924 is beyond the credit period. National Aviation Company of India Ltd, which does not have any credit period, has an outstanding of Rs 886 crore. As an immediate impact of these announcements, the shares of airline companies perked up.

While shares of the top carrier Jet Airways rose 2.7% to Rs 235, those of Kingfisher Airlines climbed 3.5% to Rs 42.5. However, shares of the state-run oil firms– Indian Oil Corp, the Bharat Petroleum Corp and the Hindustan Petroleum Corp?were down by 2-7%.

Airline companies are flying through major financial turbulence. After clocking the second fastest growth in the civil aviation world, the Indian aviation industry has seen a rapid slowdown, mainly on high fuel prices. Most airlines have been recovering only 60% cost of flying a passenger and the problem aggravated with the sharp spike in fuel prices.

With a combined revenue of $6 billion, the Indian aviation industry is expected to lose $2 billion in the current financial year.