Monday, October 08, 2018

New Air India turnaround plan; it’s massive debt of Rs 33,000 cr to move to an SPV

New Delhi: The Centre will soon announce a fresh turnaround plan (TAP) for Air India that will include transfer of the carrier’s working capital debt of Rs 30,000 crore or 62% of the total debt and non-core assets to a special purpose vehicle as well as an additional Rs 2,056-crore capital support in FY19. Given that AI had borrowed Rs 48,447 crore with an average interest cost of nearly 9%, the debt transfer from its books would give nearly Rs 2,700-crore annual relief to the loss-making carrier from the next financial year.

The SPV would service the debt transferred to it by raising extra-budgetary resources (EBRs) as well as monetising non-core assets of AI, without putting any immediate burden on the exchequer, an official told FE.
Starting FY20, the national carrier is unlikely to receive any budgetary support from the Centre, the official said. Such a move would leave AI to fend for itself, including servicing of the residual debt of Rs 18,447 crore, by improving operational efficiency and cutting wage costs.
AI’s interest cost stood at Rs 4,235 crore in FY17 while it reported a loss of Rs 5,765 crore. The airline’s losses may shoot up in FY19 as aviation fuel costs have gone up by 35% year-on-year in the past one year.
With cash crunch likely to continue due to rising fuel costs, the Centre will infuse an additional Rs 2,056 crore in the current financial year to help AI service loans and pay salary.
The additional budget support means the government’s Rs 30,231-crore equity infusion under a 10-year turnaround and financial restructuring plan will come to an end two years ahead of its schedule in FY21. AI has received an equity infusion of Rs 28,175 crore till date, including Rs 1,630 crore so far this year.
08/10/18 Prasanta Sahu and Arun Nayal/Financial Express
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