Debt-laden Air India is looking at the option of raising around R10,000 crore through tax-free bonds in the current fiscal to retire its high-cost loan for meeting working capital requirements.
According to an airline official, the proposal would require the approval of the finance ministry, to be taken up once the new government assumes office post the general election. This is significant since a similar proposal was earlier rejected by the ministry on the grounds that only infrastructure firms are allowed to come out with tax-free bonds. However, the proposal has the sanction of the civil aviation ministry as it is part of the Dholakia Committee?s recommendations relating to cost-cutting measures to shore up revenues of the carrier.
The carrier currently has a total debt of around R44,000 crore, a bulk of which ? R22,000 crore ? was taken for aircraft purchase while around R18,000 crore was for meeting working capital requirements.
?Raising the tax-free bond is currently the top priority for us, as it will help us to retire the airline?s high-cost working capital debt,? an AI official said.
The airline is also gearing up to take on competition, especially from low-cost carriers (LCCs) like IndiGo, SpiceJet and GoAir, which have in the past few years eaten into the market share of full-service carriers like Air India and Jet Airways.
?The management has taken up a number of initiatives in implementing most of these measures, including the reconfiguration of A 321 (Airbus) aircraft to reduce business class seats from 20 to 12 and increase the economy seating to bring about a hybrid model, to thwart competition from LCCs. Four of the A 320 and 6 A 321 have already been reconfigured, resulting in an enhanced capacity,? the official said.
As a part of the revenue enhancing measures, the carrier also plans to lease out space at Air India Building and at some of its booking offices to banks for installing more ATMs.
It is also currently in talks with the high commissions in Nairobi, Mauritius and Hong Kong for monetising its land assets. The airline plans to raise R5,000 crore by 2022 by monetising its land assets.
?We are looking to get our overseas properties revalued to determine the benchmark pricing and come up with tenders, respectively, in the coming months. Several public sector banks have expressed interest in our overseas assets,? the official said without naming the banks.
As for monetising its Indian assets, the airline currently awaits the Cabinet nod to sell some of its properties, which is expected to happen once the new government assumes office.
With the government?s recent infusion of R1,375 crore into the airline, which came as a result of it achieving several milestones as per the guidelines of the turnaround plan (TAP), Air India is confident of achieving future milestones to get the remaining R5,500-crore infusion from the government this fiscal.
According to the TAP, the airline was required to complete several performance-related milestones to be eligible to get periodic monetary infusions from the government.
Air India has in the last six months fulfilled most of the milestones indicated in the TAP in terms of passenger load factor (PLF), on-time performance, fleet utilisation, yield and rationalisation of various emolument structure of the employees, airline officials said.
Air India, which has also narrowed its losses in the last few years, expects to post a loss of R3,900 crore during FY14, down from R5,200 crore it posted in FY13.