IndiGo and Air India Airlines challenge Adani-managed Mumbai Airport due toreshaped payment regulations
Mumbai Airport Introduces Cash Deposit Requirement for Airlines
A standoff between Mumbai's Chhatrapati Shivaji Maharaj International Airport, operated by the Adani Group, and India's major carriers, Air India and IndiGo, has emerged over a recent change in payment terms. The airport now requires airlines to submit cash deposits as security for operational charges, replacing the earlier system of bank guarantees, a move that the airlines have contested for months.
This substantiated policy change, enacted since October last year, stems from Adani Airport Holdings' concerns over delayed payments and increasing financial obligations. Arun Bansal, the CEO of Adani Airport Holdings, justified the decision, stating, "None of these airlines normally pay on time...we want to align our cash flows with the airlines' cash flow." He further added, "They have taken advantage of our niceness."
The new system would trigger a combined $23 million cash deposit requirement from the two industry-leading carriers. Air India, which recorded a loss of $521 million in 2024, anticipates this additional financial obligation could exacerbate its already strained finances.
The Mumbai International Airport Ltd (MIAL), which catered to 53 million passengers last year, itself endured a loss of $71.11 million on revenue of $461 million. In a statement dated December 31, MIAL highlighted "deteriorating financial position" and "significant debt obligation" as rationales for the policy change, asserting that deposits would uphold financial stability and credit rating.
Bansal emphasized the importance of safeguarding against default risks, citing past airline failures such as Jet Airways, Go First, and Kingfisher. Despite the authority to cancel airlines' slots, Bansal assured that the airport has no plans to take such action, aiming to secure passengers.
The escalating controversy underscores the financial strain that the aviation sector faces, with the Indian industry's dominant players battling for more flexible payment terms amid a tough economic climate.
- The new cash deposit requirement implemented by Mumbai's airport, run by Adani Group, is a response to concerns about delayed payments and increasing financial obligations, particularly from industry leaders like Air India and IndiGo.
- Air India, already struggling financially, worries that this additional cash deposit requirement could worsen its strained finances, given its loss of $521 million in 2024.
- The financial industry, including the general news, has been following the standoff as it highlights the financial strain the aviation sector is experiencing, with dominant players like Air India and IndiGo contesting the new payment terms in a tough economic climate.
- Arun Bansal, the CEO of Adani Airport Holdings, defends the cash deposit system, referencing past airline failures such as Jet Airways, Go First, and Kingfisher, and emphasizing the need to safeguard against default risks and ensure financial stability.
