The Federation of Indian Airlines (FIA) has written to Civil Aviation Minister Ram Mohan Naidu urging the Ministry of Civil Aviation (MoCA) to direct banks to expedite the release of credit sanctioned under the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0. The body, which represents Air India, IndiGo, and SpiceJet, says airlines have received only a portion of their sanctioned amounts, with the balance stuck due to what it describes as continued hesitation from lending institutions.

Why Airlines Are Under Pressure

The FIA's letter cites the ongoing West Asia conflict as the primary driver of financial stress, pointing to airspace restrictions, mandatory flight diversions, and soaring aviation turbine fuel (ATF) prices as key factors driving up operating costs. “These developments have severely strained airline liquidity and working capital, necessitating immediate Government support,” the letter stated.

The timing is significant: Indian carriers operating long-haul routes through West Asian corridors have faced compounding disruptions for several months, adding thousands of kilometres — and proportionate fuel costs — to standard flight paths.

What ECLGS 5.0 Offers Airlines

The Union Cabinet approved ECLGS 5.0 in May 2026 with a total outlay of ₹18,100 crore, designed to unlock additional credit of up to ₹2.55 lakh crore across airlines, MSMEs, and other conflict-hit businesses. Of this, ₹5,000 crore is specifically earmarked for the aviation sector.

Under the scheme, eligible scheduled passenger airlines can raise additional credit of up to 100 per cent of their peak credit outstanding during January to March 2026, capped at ₹1,500 crore per borrower across the banking system. The government provides a 90 per cent credit guarantee through the National Credit Guarantee Trustee Company Limited (NCGTC), with no guarantee fee — a structure designed to de-risk lenders substantially.

The Disbursement Bottleneck

Despite the guarantee structure, the FIA says participating banks have been slow to release sanctioned balances. The federation is asking MoCA to provide “appropriate guidance and reassurance” to lenders to unblock disbursements. It argues that timely release is critical not just for airline viability but to preserve air connectivity across the country and safeguard jobs.

“It is imperative that MoCA facilitates the timely release of funds under the ECLGS 5.0 scheme, particularly for member airlines that remain financially vulnerable,” the letter said.

Broader Implications

The situation underscores a recurring tension in government-backed credit schemes: the guarantee infrastructure is in place, but commercial lenders — wary of sectoral credit risk — often delay disbursements, effectively blunting the policy intent. Notably, aviation is a capital-intensive sector with thin margins even in normal conditions; the West Asia disruption has compressed those margins further.

With the festive travel season underway and winter schedules being finalised, MoCA's response in the coming days will be closely watched by airlines, aircraft lessors, and airport operators alike.