1. Centre slashes equity support for Air India by half to Rs 1,713 crore

Centre slashes equity support for Air India by half to Rs 1,713 crore

Air India will get less than half of the equity support it wanted from the government this fiscal. Against the demand of Rs 3,900 crore, the state-owned airline will get only Rs 1,713 crore in FY17, official sources told FE.

By: | New Delhi | Published: November 28, 2016 6:23 AM
Air India sources said that the government did not meet its full demand for the current fiscal citing its own constraints regarding meeting the fiscal deficit. (Reuters) Air India sources said that the government did not meet its full demand for the current fiscal citing its own constraints regarding meeting the fiscal deficit. (Reuters)

Air India will get less than half of the equity support it wanted from the government this fiscal. Against the demand of Rs 3,900 crore, the state-owned airline will get only Rs 1,713 crore in FY17, official sources told FE. The capital infusion is part of the Rs 30,000-crore bailout package for Air India in the form of equity support by the government. So far, Rs 23,933 crore has been released to the company in several tranches.

Air India sources said that the government did not meet its full demand for the current fiscal citing its own constraints regarding meeting the fiscal deficit. Due to the reduced support during the fiscal, the airline may find it difficult to meet its operational and financial targets.

For the first time in nearly a decade, Air India reported an operating profit of Rs 105 crore in the last fiscal.

However, during the April-June quarter of the current fiscal it reported an operational loss of Rs 246.14 crore. The target fixed by Air India for operating profit for the first quarter of 2016-17 was Rs 87.28 crore. The reason attributed for the loss during the quarter was decline in revenue yields by around 6% over the budgeted target resulting in decline in passenger revenue and also due to fall in cargo revenue compared with budgeted estimates.

Under the turnaround plan, the airline is projected to see an operating profit of Rs 1,086 crore in 2016-17. During the same period, net loss and revenues are expected to be Rs 1,989 crore and Rs 22,206 crore, respectively, as per the provisional figures. However, with reduced support from the government, officials are unsure of meeting the targets.

“We are inducting new planes and will need the funds for that and to meet other expenses as well. Now we will have to approach the banks for the funds and it will increase out interest cost. This will partially erode the gains that we made last year,” airline officials said.

Air India this year is expected to induct 14 Airbus A320 aircraft and 6 Boeing Dreamliner (787) and three 777 aircraft on lease and according to sources, the airline needs funds for other activities like hiring pilots, cabin crews and training them.

“Our turnaround plan was revised since operationally the performance has improved but if we don’t get the funding from government as we had planned, the revised targets will not be achieved,” officials said.

Still flying low

– Air India posted an operating profit of Rs 105 crore during FY16
– However, in April-June FY17, it reported an opera-tional loss of Rs 246.14 crore
– This was against a target of operating profit of Rs 87.28 crore
– It has fixed a target of an operating profit of Rs 1,086 crore in FY17
– Net loss target has narrowed to Rs 1,989 crore while revenue is seen at Rs 22,206 crore
– With govt pruning its support in FY17, these targets are likely to be missed

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