India suggests standardised credit score evaluation system for airlines to ICAO

New Delhi, Sep 2 (PTI) India has mooted the idea of developing a standardised creditworthiness evaluation system for airlines that will also entail tiered risk-based terms for payments to be made to airports.

A working paper for having a standardised Airline Health Score (AHS) framework to assess the financial, operational and safety performance of airlines was recently submitted to the International Civil Aviation Organisation (ICAO) ahead of its 42nd General Assembly scheduled to begin from September 23.

Pitching for AHS, India said a significant proportion of revenue at most airports, particularly in developing countries, comes from aeronautical charges that are often collected on a post-service (credit) basis.

While larger airlines may enjoy stable financials and timely payments, smaller or financially distressed carriers often accumulate dues, exposing airport operators to substantial financial risks. The absence of a globally accepted mechanism to assess the financial reliability of airline customers hampers proactive risk management by airports, the working paper said.

India is one of the world's fastest-growing civil aviation markets, annually handling more than 150 million domestic passengers.

"Despite this growth, there is no unified, transparent mechanism to assess the overall health of airline operators -- a gap that affects regulatory oversight, investor confidence, and passenger trust.

"India, like many other states, has observed increasing delays in payments by airline operators. Despite contractual safeguards, the reliance on credit has grown in both domestic and international operations," it said, adding that airports are forced to manage high receivables and deploy manual or ad hoc credit control measures.

According to the working paper, ICAO can look at developing the standardised AHS framework based on various metrics, including on-time performance, cancellations, fleet age and revenue per available seat kilometre.

While noting that the framework should be data-driven, scalable and transparent, India urged ICAO to recognise the need for a standardised creditworthiness evaluation system for airlines, and to begin a formal study with contributions from IATA, ACI, States, and relevant financial institutions.

"ICAO may consider forming a working group with states, IATA, ACI, and academic partners to refine the methodology," it said.

While the International Air Transport Association (IATA) represents airlines, Airports Council International (ACI) is a grouping of airports.

As per the working paper, the standardised creditworthiness credit score system would allow for tiered risk-based payment terms, such as pre-payment for low-rated carriers and extended credit for high-rated carriers, as well as better negotiation and contract management by airport operators.

"The credit score should not act as a barrier to entry but as a risk-awareness tool. ICAO can also provide a platform for dispute resolution and transitional support for financially stressed airlines," it added.

The working paper also mentioned that airports across India increasingly face financial exposure due to the delayed payments or defaults by airlines, especially in a dynamic aviation environment marked by frequent market entries and exits.

"Unlike other sectors, airport operators currently lack a structured mechanism to evaluate the financial reliability or operational sustainability of airline partners," it said. PTI RAM IAS BAL BAL