Monday, November 05, 2018

Air India turnaround: Will debt SPV and fresh equity infusion save national carrier?

Another plan to reduce Air India's debt and keep the national carrier flying is taking shape but there are also concerns if another round of cash burn will make a turnaround possible.

The creation of a Special purpose Vehicle (SPV) for reducing the national carrier's debt had cropped up many times in the past but now it looks like a certainty.

As much as Rs 29,000 crore of the airline's working capital debt will be transferred to the SPV, thereby halving the debt burden of the company, the Economic Times reported on Monday, citing three officials.

The carrier has received almost an equal amount in the last six years under a rescue package offered by the previous government. Sceptics would ask if the latest measure will actually save the carrier and plug the holes through which money drains.

The bigger question is whether funnelling more money into the carrier will actually help it turn around. Is debt reduction alone a panacea for the ills of the airline? Higher fuel bills, bloated operational costs, rising staff costs and tightening competition all will make the ride choppier for the airline.

As per the latest reports, the SPV will be known as Air India Assets Holding (AIAHL) and will be headed by Air India's chairman.
05/11/18 Jacob Nelly/IBT