Air India seeks govt soft loan to upgrade IT

Mumbai: The civil aviation ministry is expected to make a strong pitch to Prime Minister Manmohan Singh—who now also heads the finance ministry—for quick approval of state-owned flag carrier Air India’s request last week for Rs 4,550-crore in equity and soft loans. The key component of Air India’s plan includes a loan of Rs 1,000 crore to upgrade its information technology systems and station offices across the globe to comply with the standards of Star Alliance, which it aims to join in March. The Star Alliance is a global network of 17 airlines linking 855 airports in 155 countries. Joining it will help Air India increase passenger yields through code sharing and interlining agreements. That would also give it an edge over private sector rivals Jet Airways and Kingfisher Airlines, which have both launched international routes.
However, all three airlines are struggling financially due to rising costs and slowing revenues. Last month, Air India saw a 15% drop in domestic load factors and a 13% dip in international travel owing to higher airfares and the economic slowdown. The company lost Rs 2,000 crore in 2007-08.
The carrier is also asking for a Rs 1,800-crore soft loan and Rs 2,750 crore equity support. Air India CMD Raghu Menon is understood to have requested a three-year moratorium on loan repayments. While the finance ministry has set an 11% interest rate for loans to public sector undertakings this fiscal, Air India is negotiating for a rate between 6% and 10%.
The airline is hoping to upgrade its IT network before the March 2009 deadline set by Star Alliance.
03/12/08 Shaheen Mansuri/Financial Express

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Categories: NACIL Dec 2008