Sinking Air India has Rs 16000 crore debt

New Delhi: Saddled with Rs 16,000 crore debt, Air India (AI) has approached government for fresh capital infusion and soft loan even as the airline launched a major cost-cutting exercise. Because of huge losses in the past, AI's net worth has already become zero.
However, in its presentation to government, AI's management has proposed a slew of measures for turnaround, which include an IPO in 2012 to raise fresh capital. Government is likely to come out with a detailed financial package on August 25.
Besides financial restructuring, the government-owned company has also chalked out a strategy to become profitable. In order to regain its market share, AI would launch a low-cost domestic service in September, CMD Arvind Jadhav said.
It is also restructuring operations and hiving off maintenance, repair and overhaul, cargo and ground-handling operations in separate companies. Jadhav said that these units will operate as standalone profit centres and provide services to other airlines also.
The airline is looking for capital infusion to soar up the comfort level of its lenders. Jadhav said that according to industry norms, debt should be up to two times of the capital. In this case, government should infuse equity of Rs 8,000 crore in the company. However, sources in the government ruled out such a huge capital infusion. According to them, government is working out a solution to infuse some capital in the airline to restore normalcy in functioning. At present, AI is finding it difficult in arranging even working capital for day-to-day operations as banks are not comfortable in extending fresh loans.
08/08/09 Times of India

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Categories: NACIL Aug 2009