Yet another bailout plan for Air India

A few years ago when India’s national carrier, Air India (AI), had undergone a design and logo change, its preferred colour on its fleet was red. But the management of AI never anticipated that the same red will soon be splashed all over its balance sheet.
Once the leader of the Indian skies and now reduced to the fourth position in terms of market share, Air India is carrying a loss of Rs 15,000 crore accumulated over the last four years. It is having a massive debt burden of Rs 40,000 crore (almost equally divided between working capital and long-term loan) and to service this, it annually pays around Rs 1,800 crore as interest. In the first six months of the current fiscal year, the firm has lost Rs 3,451 crore and it owes Rs 600 crore to the Airports Authority of India (AAI). The government-owned company is now asking for a one time fund infusion of Rs 17,500 crore.
No wonder the Civil Aviation Minister Vayalar Ravi, recently, told the Parliament that Air India’s expenditure is Rs 57 crore a day against its earnings of Rs 36 crore a day, thus making a daily loss of Rs 21 crore. This does not just reflect the financial mess AI is in. It is a reflection of the strain brought upon the taxpayers’ money as it ends up every time seeking bail out from the government.
This, not to speak of the dues to the tune of Rs 2,280 crore that the airline has piled up as payment due to the PSU oil companies against supply of fuel. No wonder oil companies want AI to pay cash for fuel. But, to be fair to AI, the entire civil aviation industry is in a mess as all players were losing money until recently. High fuel price and cut throat competition among carriers are the main reasons for the distress.
28/03/11 B S Arun/Deccan Herald

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Categories: Air India Mar 2011