Air India on the brink of closure again

New Delhi: India’s national carrier Air India’s operations could come to a halt in a month if it fails to pay interest on its Rs 43,000-crore loans from banks and financial institutions. The airline’s total dues on March 31, 2011 stood at Rs 4,486 crore. Documents accessed by HT showed that AI defaulted on payment of service tax and interest on working capital from April 2011. The banks have since stopped lending to AI.
Worse, as the banks may freeze its accounts and start selling off its assets pledged for securing the loans, the airline has no option left other than a government bailout yet again.
"In the case of failure to honour domestic debt commitments, banks can initiate action for attachment of aircraft or inventory, depending on what has been put up as collateral,” confirmed MS Balakrishnan, former director of finance at the erstwhile Indian Airlines.
The banks said they would need a letter of comfort or sovereign guarantee from the government to resume lending to Air Inda. If AI does not make the minimum interest payments by July-end, the loans will turn into non-performing assets — loans that do not earn any interest.
01/07/11 Tushar Srivastava/Hindustan Times

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Categories: Air India Jul 2011