Air India asks for Rs 20,000 crore bailout

New Delhi: Cash-strapped Air India-Indian Airlines has sought an immediate loan of about Rs 10,000 crore from the government along with an annual
equity infusion of Rs 2,500-3,000 crore for the next four to five years, which will be linked to the induction of new aircraft into its fleet, sources said.
In all, the tottering airline on Saturday projected a requirement of almost Rs 20,000 crore, roughly the size of Delhi state's annual budget, over the next five years.
The assistance was sought during a presentation to the committee of secretaries (CoS), which is headed by cabinet secretary K M Chandrasekhar. The finance ministry has now been asked to determine the extent of help AI should get, once it prepares a detailed plan, to be reviewed by the CoS in a month's time.
Aviation minister Praful Patel told TOI that the initial equity infusion would be limited to Rs 2,000-2,500 crore. The government may make only a partial contribution. The balance will be raised from the market via the IPO route at a later date, he said. Patel assured that the equity sought from the government would be kept low. AI is also learnt to be looking at an immediate soft loan of about Rs 10,000 crore from the government.
The airline currently has an equity base of Rs 145 crore. The merged airline, National Aviation Company of India Ltd (NACIL), accumulated losses of Rs 7,200 crore till March. The AI-IA combine is to receive 111 new aircraft worth $11 billion (list price) to replace decades-old planes in its fleet. Until now, 51 new planes worth $4 billion have joined the fleet. But the slowdown, which has hit all airlines, has affected the already struggling AI particularly badly and it needs a massive cash infusion to stay in the skies.
So, armed with a plan for cost-cutting and revenue enhancement, AI chief Arvind Jadhav met the CoS to seek a bailout. The CoS, which includes the finance and aviation secretaries Ashok Chawla and M M Nambiar, was set up to examine issues related to the national carrier after Prime Minister Manmohan Singh met Patel last month.
Making a presentation to the committee of secretaries (CoS) on Saturday to get bailout funds may be the easy part for National Aviation Company of India Ltd (NACIL) — the Air India-Indian Airlines combine. For, cost-cutting moves like salary slashing, returning of expensive planes and creating new revenue generating streams, admit top officials, will be an uphill task.
However, it was made abundantly clear to NACIL that any financial help from the government will come, if and only if, NACIL is able to convince it about two things — it has a plan, and more importantly, that it can implement it. Also, any assistance from the government would have to be matched by an aggressive cost reduction, including a drastic cut on salaries, and a better revenue management by NACIL and that it must come up with a concrete cost reduction proposal.
26/07/09 Saurabh Sinha/Times of India

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Categories: NACIL Jul 2009