1. Austerity drive may hit Air India’s bailout

Austerity drive may hit Air India’s bailout

National carrier Air India received equity infusion of Rs 4,800 crore from the government between April and October...

By: | Updated: December 4, 2014 11:33 AM
Air India received equity infusion of Rs 4,800 crore from the government between April and October. PTI

Air India received equity infusion of Rs 4,800 crore from the government between April and October. PTI

National carrier Air India received equity infusion of Rs 4,800 crore from the government between April and October, but it may not receive the full amount originally promised to it for FY15.

A senior Air India official told FE that the debt-laden carrier had already received around 74% of the funds it was supposed to get in 2014-15 (Rs 6,500 crore), but the government’s allocation towards the debt-laden carrier’s turnaround plan had been reduced to
Rs 5,780 crore for the fiscal.

The official cited “fiscal contraction” as the reason for the government’s decision to revise downwards its share of equity infusion into the airline during the current fiscal. The central government is trying to cut down on spending to rein in the fiscal deficit.

graph-air-india

The airline was expecting to get Rs 7,069 crore in the current fiscal from the government (Rs 6,500 crore as equity infusion and a plan allocation of Rs 569 crore) to improve its financial position.

“Air India has already requested the cut (in equity infusion) to be reversed as the entire turn around plan (TAP) of the airline depends on timely infusion of funds by the government,” the airline official said. Equity infusion by the government was also an essential factor based on which the airline has sought the Reserve Bank of India’s approval to restructure its debt, he added.

According to the turnaround plan chalked out for Air India by SBI Capital Markets in February 2012, the government was to infuse Rs 30,000 crore into the airline over nine years, starting 2012-13, on the condition that the airline meets certain operational and financial targets.

The equity infusion received by the airline during the current fiscal thus far has been used to repay loans obtained to meet working capital needs, backed by government guarantee, and interest on debt taken to purchase aircraft, the Air India
executive said.

In 2007, Air India had borrowed around $3.8 billion from domestic and international lenders to buy new planes.

“Out of the total liability of $3.8 billion incurred by the airline in 2007, about 60% has been repaid to financial institutions while the remaining will be repaid by FY20,” the official said.

Air India’s total debt stood at around Rs 40,000 crore as on September 30 — split equally between working capital debt and loans taken to buy aircarft.

Air India also recently paid off about $340 million,  or Rs 2,100 crore, worth of government-guaranteed loans, through funds generated from selling five Boeing 777 aircraft to Etihad Airways in February-March.

Air India posted a net loss of Rs 5,389 crore in FY14, almost the same level as in FY13. Operating revenues rose 20% in the same period to Rs 19,170 crore.

According to the internal targets set by the board, Air India’s operating losses for FY15 are expected to drop 39% to Rs 1,235 crore. Net loss is also estimated to come down to Rs 4,346 crore by the end of FY15.

Tags: Air IndiaSBI
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