Government plans soft loan for troubled Air India

New Delhi: The government plans to raise the capital of Air India after a slump in traffic and increasing debt pushed the carrier into a financial crisis.
The government will give soft loans to Air India, civil aviation minister Praful Patel told Parliament on Tuesday. A plan for an initial public offering by the carrier has been held back because of market conditions, Patel said without elaborating on the loans or share sale.
Air India cut routes and contract workers and is considering delaying or cancelling orders for new Airbus SAS and Boeing Co. planes to slash costs, Patel said. It delayed salary payments for its 31,000 employees last month after an estimated Rs5,000 crore loss in fiscal 2009.
It’s in this background that an equity infusion and soft loan by the government as a measure of softening the adverse financial situation is contemplated, Patel said. The government in the past has never assisted Air India, which has an equity capital of Rs145 crore, Patel said.
The national carrier’s debt at least doubled to Rs15,200 crore as of June after it increased loans to pay for 49 of the 111 aircraft it bought from Airbus and Boeing. Patel didn’t elaborate on the cancellation of orders.
Air India has asked banks to roll over the existing working capital borrowings, which are due for repayment, Patel said in a separate statement. The airline has also sought more credit from oil companies regarding payment for fuel, it said.
Separately, the opposition Bharatiya Janata Party (BJP) on Tuesday demanded that the government come out with a white paper on the merger of Air India and Indian Airlines, claiming that the merger had only pushed the ailing airlines into a financial crisis.
14/07/09 Bibhudatta Pradhan/Santosh K. Joy/ Bloomberg, Livemint

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Categories: NACIL Jul 2009