Jet Airways is set to benefit from the Reserve Bank of India’s (RBI) decision to allow airlines to raise working capital through the external commercial borrowings (ECBs) route till March 2015.

The RBI, on Wednesday, extended this facility that was first granted in Union Budget 2012-13 presented in March 2012 to help cash-strapped airlines to tap foreign capital. However, in these two years, not a single airline could raise ECB due to their weak credit rating.

As per RBI’s guideline, airlines collectively can raise $1 billion in ECB while an individual airline can raise a maximum of $300 million.

With this extension, Jet Airways would be the sole likely beneficiary as it was backed by financially-sound Etihad Airways, said experts.

“Jet Airways has been in the market to raise $300 million ECB for long. With this extension, we expect Jet should close the deal this year. Etihad is willing to provide guarantee for $150 million ECB and that should get through. The balance $150 million ECB can be raised without any guarantee due to Jet’s strong alliance with Etihad,” Kapil Kaul, CEO, South Asia, Centre for Asia Pacific Aviation, told

The Hindu. “None of the domestic airlines have been able to tap the ECB route given their financial status. A company needs good credit rating to impress foreign investors,” Mr. Kaul added. At present, IndiGo is the only profitable Indian airline but its profit margin is shrinking.

Commenting on the RBI’s decision, Amber Dubey, partner and India head of aerospace and defence, KPMG, said: “Welcome move. Will help our cash-strapped airlines save around 100-200 basis points on interest cost after factoring in the hedging cost. The ECB facility should be allowed for a five-year period at least, to bring in predictability, rather than extending it for shorter periods.” Air India, which was planning to raise funds through ECB two years ago to refinance part of its working capital loans, had also not been able to raise any money so far.

“We have not raised any ECB so far under the scheme. Due to rupee depreciation it would have proved expensive unless you buy a hedge which again will neutralise the benefit in interest differentials,” S. Venkat, Director Finance, Air India, told The Hindu.

Thus, Jet, which was the first beneficiary of the government’s FDI policy, will stand to gain this time as well.