A dispute has erupted between Mumbai’s Chhatrapati Shivaji Maharaj International Airport, operated by the Adani Group, and India’s two largest airlines, Air India and IndiGo. The airport has introduced a new payment term, requiring airlines to submit cash deposits as security against operational charges, replacing the earlier system of bank guarantees. This change, implemented in October last year, has been met with opposition from the airlines, which have been lobbying against it for months.
The Adani Group’s decision is reportedly due to concerns over delayed payments and increasing financial obligations from the airlines. Arun Bansal, CEO of Adani Airport Holdings, stated that the airlines have taken advantage of the airport’s leniency and that the new system aims to align the airport’s cash flows with those of the airlines. The airlines, which together hold 91% of India’s aviation market, would need to submit around Rs 2 billion in total, which could significantly impact Air India’s already pressured finances.
The Mumbai International Airport Ltd (MIAL) has cited its own financial struggles, including a loss of $71.11 million on revenue of $461 million, as a reason for the policy change. The airport believes that the deposits would support financial stability and credit rating, and provide protection against default risks, citing past airline failures such as Jet Airways, Go First, and Kingfisher. While the airport has the authority to cancel airlines’ slots, Bansal has assured that it does not plan to do so in order to safeguard passengers.
The introduction of cash deposits as a security measure has sparked a rift between the airport and the airlines, with the latter arguing that the new system would put a significant strain on their finances. The dispute highlights the challenges faced by the Indian aviation industry, with airlines struggling to stay afloat amidst rising costs and decreasing demand. The outcome of this dispute remains to be seen, but it is likely to have significant implications for the future of India’s aviation sector.