While one of Air India’s pilots’ unions, Indian Commercial Pilots’ Association (ICPA), has written to Prime Minister Narendra Modi backing privatisation of the debt-laden airline, the civil aviation ministry has instead recommended that the current turnaround plan should continue since the airline’s profitability has been steadily improving.
An official in the ministry told FE that it has written to the PM suggesting that the government support the carrier by infusing about Rs 3,000 crore at the earliest, which is the cumulative shortfall in equity that had been promised to the airline since the announcement of it turnaround plan in 2011.
?We have said that the turnaround plan should be implemented and the shortfall in equity of about Rs 3,000 crore be met at the earliest for the airline to profitably continue operations without having to borrow from banks or the market,? the official said.
The government had announced plans to infuse almost Rs 30,000 crore in equity over a decade, but equity support has being untimely because of a widening fiscal deficit.
Earlier this month, Air India received equity infusion of Rs 1,375 crore from the government, the first tranche of the Rs 5,500-crore the airline is supposed to receive in FY15.
State-owned Air India has also decided to raise about Rs 10,000 crore by issuing tax-free bonds in FY15 to retire high-cost working capital debt, after an approval from the finance ministry, as reported by FE recently.
The national carrier currently has a total debt of about Rs 44,000 crore, of which Rs 22,000 crore is aircraft-related debt and the remaining is long-term working capital debt.
Air India has taken several steps to cuts costs in the last few years, like sale of some aircraft and real estate assets, apart from cutting loss-making routes and wages.
However, the carrier is still expected to post a net loss of Rs 3,900 crore in FY14, despite an 18% jump in revenues to Rs 19,500 crore. In FY13, losses stood at Rs 5,200 crore.