AI plans more foreign flights to save fuel cost

Written by fe Bureau | New Delhi/Mumbai | Updated: Jun 29 2011, 07:05am hrs
Debt-ridden Air India plans to divert part of its capacity to nearby overseas destinations such as Dubai and Singapore to increase its revenue from operations. The move is expected to help the airline get cheaper fuel in the overseas market, thereby reducing operating cost and generating more cash compared with domestic flights.

The airline has taken the decision in the face of its inability to raise funds from banks and financial institutions. The airlines daily losses have skyrocketed to about R20 crore compared with R14 crore a year-and-a-half ago. Air India loses on over 80% of its total 395 domestic and international flights.

We are planning to put 8-10 domestic flights on international sectors. This would bring a little extra cash. Till the time newly-set up CoS (committee of secretaries) suggest ways to strengthen airlines financials we have to look for all possible ways of enhancing revenues, an airline official said.

Meanwhile, leading bankers, which were part of the R40,000-crore loan restructuring package of Air India, have asked for the governments gurantee and other supports before they finalise and start fresh exposurre in the company.

Banks are really concerned about the financial conditions of Air India, which has been incurring losses for quite sometime now. It will not be that easy for us to provide fresh funds to the company without the governments approval. We are seeking some kind of commitment from Air India. Certain operational parameters have to be toned up before we go ahead in the matter. We want to know how the companys operation was going to become viable,' said a senior official of State Bank of India, which along with other banks, are in the process of restructing AIs existing financial liabilities.

We are still in talks with the Reserve Bank of India (RBI) and the government as well on the issue. The issues under discussion include conversion of equity into long-term loans. Also, we are seeking certain kind of guarantee from the government. Though the loan, given by various lenders, comprises both long-term and short-term ones, short-term loan alone comprises of R20, 000 crore. Some of the other issues which are being discussed as a part of financial restructuring may include use of preferential shares, various commitments to be made by the government and above all, certain operational parameters, he said.

However, SBI, which has given R1,200 crore in the form of short-term loans to AI, is getting its entire loan serviced by the borrower on a regular basis, he added.

Air India is expected to report record losses of R7,000 crore for the financial year ending March 2011. It is burdened with a debt close to R40,000 crore and finding it tough to service monthly interest outgo.