Air India seeks another Rs 5,000 crore from government

New Delhi: Air India is again seeking financial help from the government, this time it is Rs 5,000 crore equity support, as a one-time moratorium on interest repayment.
According to sources, members of the airline’s board of directors and senior officials of the ministry of civil aviation met the prime minister on Tuesday to apprise him of AI’s financial health. And on Wednesday evening, they presented their case before finance minister Pranab Mukherjee.
It is the first time that well-known India Inc figures, namely, Amit Mitra, Fali Major and Harsh Neotia among others, went to the PM and the FM to advocate Air India’s problems, since they are now part of the airline’s board.
They (board members) are believed to have placed two demands before the FM. Firstly, an equity infusion of Rs 5,000 crore to take care of one-time loan repayment costs, secondly, a zero coupon sovereign guarantee to bring down loan repayment costs.
In return, AI is promising a complete restructuring of the Rs 18,000 crore debt on its books. As of now, a majority of this Rs 18,000 crore attracts interest rate as high as 11.5%.
If the government does agree to AI’s fresh equity infusion demand, it is sure to seek iron clad guarantees in terms of cost savings.
20/05/10 Sindhu Bhattacharya/Daily News & Analysis

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Categories: NACIL May 2010