Monday, October 08, 2018

Govt makes yet another plan to tackle Air India's loan problem

The government is going to announce a turnaround plan (TAP) for debt-ridden Air India that will reportedly include transfer of the national carrier's working capital debt of Rs 30,000 crore and non-core assets to a special purpose vehicle (SPV) as well as an additional Rs 2,056 crore capital support in FY19.

According to a report in The Financial Express, the transfer of debt from its books would help Air India save around Rs 2,700 crore annually from the next financial year. The cash-strapped airline had taken a loan of Rs 48,447 crore with an average interest cost of nearly 9 per cent.

The report added that the SPV would service the debt transferred to it by raising extra-budgetary resources (EBRs) as well as monetising non-core assets of Air India.

The national carrier may not receive any support from the Centre in the next fiscal year, the report said, adding such a move would leave Air India to fend for itself, including servicing of the residual debt of Rs 18,447 crore, by improving operational efficiency and cutting wage costs.
Air India, which survives on Rs 4,600-crore annual bailout package, serves a mere 12.4 per cent of the domestic passenger traffic, and competes with aggressive private sector peers like IndiGo, SpiceJet and Jet Airways who are constantly baying for passengers.
With international crude oil prices hitting new highs, Air India's losses are expected to shoot up.
08/10/18 Business Today

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