Air India goes on cost-cutting spree as carrier’s daily losses fly up to Rs21 crore

New Delhi: Air India’s financial condition continues to worsen. Despite myriad revenue enhancement plans, the national carrier’s daily losses have widened to Rs21 crore from about Rs15 crore two years back.
According to official sources, the airline’s daily cash inflow now is Rs36 crore (from domestic and international operations), but outgo stands at a whopping Rs57 crore. So, annual losses this fiscal could cross Rs7,500 crore unless urgent steps are taken to streamline cash outgo. The country’s fourth largest airline (by passengers carried) operates 320 flights and carries 72,500 passengers daily.
In the last two years, working capital loans of the airline have climbed to Rs22,000 crore from Rs16,000 crore. And another Rs18,000 crore worth of loans are also on AI’s books for aircraft purchase. No wonder then that the airline management is trying all tricks in the book to rationalise interest outgo.
Official sources said a consortium of banks has agreed to convert some short-term loans to long-term loans, effectively bringing down the interest outgo to 9% from 13-14%.
“The banks have set only one condition: AI should procure a letter of comfort or sovereign guarantee from the government for the lower rates to take effect. We are expecting this letter after the government approves AI’s turnaround plan.”
Official sources denied any intention on the government’s part to let bankers convert loans into equity at any point in the future.
“Absolutely no question of allowing banks to convert loans into equity. AI will remain a 100% government-owned airline,” they said.
Meanwhile, a turnaround plan already approved by the AI board of directors has allowed the carrier to enhance fleet by about 100 aircraft to take it to 240.
23/04/11 Sindhu Bhattacharya/Daily News & Analysis

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Categories: Air India Apr 2011