AI warns govt of loan default consequences

New Delhi: Air India has warned the Prime Minister’s Office (PMO) and the finance ministry that the country’s sovereign rating may be hit as the airline is on the brink of defaulting on interest payments on foreign loans of Rs 15,000 crore. The loans are backed by a government guarantee.
The state-owned airline had taken these loans to part-fund its Rs 22,000-crore aircraft acquisition programme. The banks involved include Citibank, Standard Chartered, Deutsche Bank, J P Morgan and KFW.
In a communication to PMO and the finance ministry sent a few days ago, the Air India management pegged the overdue amount at Rs 4,489 crore, including payments to oil companies, airport operators, vendors and employees, besides interest on working capital loans.
It said due to the critical liquidity position on account of banks’ refusal to lend (because of non-payment of interest on working capital loans), the vendors’ dues of over 120 days were pending. The vendors were threatening to put the airlines on “credit hold”, which would hit operations, it said. Such an interruption, it said, would lead to a fall in revenue, hitting even payments for loans taken to buy aircraft.
The situation, it said, had been worsened by the fact that the government had not paid dues of Rs 1,173 crore on account of VVIP operations and flights to evacuate Indians from Libya, Egypt and Japan.
26/06/11 Surajeet Das Gupta/Business Standard

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Categories: Air India Jun 2011