Friday, February 25, 2011

AI wants Rs 17,500 cr more to clean books

To come out of the financial mess, Air India, in its turnaround plan, will be asking for one-time infusion of Rs 17,500 crore from the government. The turnaround plan has been vetted by financial advisory firm Delloite and will be taken up in a board meeting of the airline slated for next month. The matter will then be referred to the government.

“Air India is asking for Rs 17,500 crore to clean its books and start its finances afresh. This demand is huge considering the airline has not been able to perform in the past,” said a senior ministry official, who did not want to be identified.

This government support, which could be in the form of equity infusion and loan waiver, is set to clean Air India’s books, which has a debt of over Rs 40,000 crore on an equity base of Rs 2,145 crore — it received an equity infusion of Rs 800 crore in 2009-10 and Rs 1,200 crore in 2010-11. Out of the Rs 40,000 crore, working capital debt is at Rs 21,000 crore and the rest are loans taken to fund aircraft acquisition.

The national carrier had ordered 111 aircraft worth Rs 46,000 crore and taken deliveries of 80 aircraft till now.

Air India also has an annual interest payment of around Rs 1,800 crore and has accumulated losses of over Rs 15,000 crore. The carrier lost Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, and Rs 5,551 crore in 2009-10.

The airline is also losing money on a daily basis. Out of the Rs 22 crore the national carrier earns every day, Rs 13.5 crore go to the oil companies and Rs 8 crore to the airport operator and ground handlers and spare-parts companies, leaving the airline with only Rs 50 lakh a day. This translates into only Rs 15 crore a month. The monthly wage bill and interest payment of the airline are about Rs 250 crore and Rs 150 crore.

The five-year turnaround plan also talks about Air India increasing domestic market share to over 30 per cent, operating a fleet of 280 aircraft and around 10 per cent of its employees retiring.

The national carrier with a fleet of 130 aircraft is consistently losing its market share in the domestic sector and flew only 15.4 per cent of the total passengers in January.

The report projects that around 2,600 employees of the airline will retire from the airline in the coming three-year period. Currently, Air India has around 30,000 employees and the airline also plans to shift people to these subsidiaries. It has created a ground-handling subsidiary called Air India-Singapore Airport Terminal Services and is awaiting Cabinet approval for an aircraft maintenance subsidiary called Air India Engineering Service.


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