The Federation of Indian Airlines (FIA) has sought the Centre’s intervention for faster disbursal of funds under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, asking the Civil Aviation Ministry to engage with participating banks and facilitate the release of sanctioned credit to eligible carriers.
The industry body, which represents major carriers including Air India, IndiGo and SpiceJet, has sought support for member airlines looking to access the latest version of the government-backed emergency credit programme. It has argued that timely availability of liquidity is essential for airlines to meet critical operational expenditure and working capital requirements.
FIA seeks ministry support
In its communication to the Civil Aviation Ministry, the FIA sought guidance to participating banks to expedite the processing and release of funds under ECLGS 5.0. The request is aimed at ensuring that credit sanctioned under the programme translates into usable liquidity for airlines without avoidable delays.
The industry body said airlines require adequate cash flows for aircraft operations, maintenance and other day-to-day expenses. Its intervention comes as carriers continue to deal with elevated operating costs following disruptions caused by the West Asia conflict, higher aviation turbine fuel prices and constraints on international operations.
SpiceJet awaits Rs 350 crore
SpiceJet has opted for assistance under ECLGS 5.0 and has received an initial disbursement of Rs 150 crore. The airline is awaiting another Rs 350 crore under the credit facility, bringing the amount sought by the carrier to Rs 500 crore.
The FIA’s request is broader than SpiceJet’s case and covers eligible member airlines seeking access to credit under the scheme. The industry body wants the ministry to help address bottlenecks in the disbursal process by coordinating with participating lenders.
Rs 5,000 crore for airlines
The Union Cabinet approved ECLGS 5.0 in May as a targeted response to liquidity pressures arising from the West Asia crisis. The scheme is designed to facilitate up to Rs 2.55 lakh crore in additional credit across eligible businesses, with Rs 5,000 crore specifically earmarked for the aviation sector.
Airlines can access additional credit of up to 100% of their eligible working capital requirement, subject to a maximum of Rs 1,500 crore per borrower and prescribed conditions. The initial maximum loan support is Rs 1,000 crore, with an additional Rs 500 crore available subject to an equivalent equity infusion by the borrower.
Unlike a direct government bailout, ECLGS operates through participating lending institutions. The government, through the National Credit Guarantee Trustee Company Limited, provides a guarantee covering 90% of the amount in default for loans extended to eligible airlines, reducing the credit risk faced by lenders.
Seven-year repayment window
The credit available to airlines comes with a tenure of up to seven years, including a two-year moratorium on repayment. The framework also permits up to 50% of the interest to be converted into a Funded Interest Term Loan, helping carriers manage immediate cash-flow pressures.
Scheduled passenger airlines with outstanding credit facilities as of March 31, 2026, can qualify subject to eligibility conditions, including requirements relating to the status of their accounts. Loans sanctioned under the scheme are covered until March 31, 2027.
The structure is intended to provide airlines with breathing room during a period of exceptional external pressure rather than compensate them directly for losses.
Why airlines need liquidity
The aviation sector has faced a combination of higher fuel expenses, exchange-rate volatility, airspace restrictions and disruptions to international routes. Aviation turbine fuel is one of the largest components of an airline’s operating expenditure, meaning sharp increases can rapidly put pressure on margins and working capital.
Airspace closures can add to those pressures by forcing longer flight paths, increasing fuel consumption and reducing aircraft utilisation. Reduced international operations can simultaneously affect revenue, leaving airlines facing higher costs and weaker cash generation.
ECLGS 5.0 was designed partly to address these short-term liquidity mismatches by encouraging banks to extend additional credit with substantial government guarantee protection.
Focus now on disbursal
For airlines, however, approval of the credit framework is only the first step. The FIA’s latest representation indicates that the industry is now focused on ensuring eligible and sanctioned funds are released quickly enough to meet immediate requirements.
The government had introduced ECLGS during the Covid-19 pandemic and subsequently expanded it through several versions to cover sectors facing financial stress. The fifth version marks a renewed use of the credit-guarantee mechanism in response to external geopolitical disruptions.
With Rs 5,000 crore specifically earmarked for airlines, the industry body is seeking to ensure that delays at the lending stage do not blunt the intended impact of the support. The Civil Aviation Ministry’s engagement with banks will consequently be important in determining how quickly the available credit reaches carriers facing working capital pressures.