Air India defaults on interest payment for the first time

The airline, which is saddled with a massive debt of Rs 40,000 crore, has outstanding interest payments of Rs 400 crore for the last two months, according to persons with direct knowledge of the matter.
If a company fails to pay instalment (principal and interest) for three consecutive months, lenders have the right to classify the loan as a non-performing asset ( NPA )). Air India borrowed loans from a consortium of 22 banks led by SBI.
Air India finds itself in a tight spot as public sector banks refused to offer loans to service its debt. The airline has accumulated losses to the tune of Rs 16,000 crore over the last three years.
"We have reached an upper limit for funding Air India and are unable to lend more," said a senior official close to PSU banks . Air India has written to the government asking for the payment of Rs 1,035 crore dues the latter owes the airline for hiring charted planes for VIP travel. The government will pay part of that amount to Air India by this month. This amount will be used by Air India to pay the interest amount, according to sources.
"The government will pay us part of the dues. So, we should be getting around Rs 350 crore from the government by next week, which we will use to pay the interest," said a senior Air India official, on condition of anonymity. Air India's spokesperson declined to give an official comment on the development.
21/05/11 Nisha Poddar & Sameer Hashmi/Economic Times

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Categories: Air India May 2011