Boon to debt-ridden airlines

Most Indian carriers ( except LCCs such as IndiGo, GoAir and SpiceJet) which are struggling with mounting losses ( US$ 1.65 billion in FY13) and finding it difficult to pay their vendors in time, took the lead to secure an approval from IATA to change the billing cycle to seven days from fifteen.

Amber Dubey, Partner and Head- Aerospace and Defense at global consul- tancy KPMG argues their case, saying, “With the advent of technology, payment settlement on the NSE happens in T+ 2 days. This used to be spread over several weeks. So it’s not a surprise that in the airline sector, something similar is being tried. It would, of course, cause some pain to travel agents in the short run, but will become stabilised like it did in the case of the stock market.

Faster settlement will increase the velocity of money and prevent any one player in the chain to gain an undue advantage.”

“We are seeing the blurring of differences between LCCs and FSCs. Most LCCs charge an upfront deposit and then issue tickets to agents Partner and Head-Aerospace and Defense at KPMG against the same. The weekly settlement by FSCs would still give an advantage to the travel agents,” Dubey adds.