Air India looks to Narendra Modi Cabinet to save Rs 900 cr annually

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New Delhi | July 29, 2016 6:25 AM

This can be used towards retiring its aircraft-related debt and cut its interest outgo. Currently, the annual interest outgo from the airline is R4,500 crore.

Air India's total debt stands at R50,000 crore, of which R20,000 crore is aircraft-related. Its annual interest outgo will come down to around R3,400 crore as a result of this package recast.Air India’s total debt stands at R50,000 crore, of which R20,000 crore is aircraft-related. Its annual interest outgo will come down to around R3,400 crore as a result of this package recast.

What could provide a significant respite to Air India and help it save around R900 crore annually, the Union finance ministry has approved a proposal from the civil aviation ministry to give the national carrier a part of the annual bailout package as grant from the government.

This can be used towards retiring its aircraft-related debt and cut its interest outgo. Currently, the annual interest outgo from the airline is R4,500 crore.

Air India’s total debt stands at R50,000 crore, of which R20,000 crore is aircraft-related. Its annual interest outgo will come down to around R3,400 crore as a result of this package recast.

“This will also bring down the equity component of the government in Air India as the interest component was a part of it. This proposal, once approved by the Cabinet, will be effective retrospectively from FY15 till the tenure of the bail out package. Officials believe around R14,000-15,000 crore will be saved if the proposal goes through,” said a senior bureaucrat in the ministry.

The airline has been trying to reduce its interest outgo on debt by taking a series of measures like converting the long-term debt in to NCDs and repaying a third of the short-term loans in FY 17.

Air India has approached the government asking it to guarantee non-convertible debentures (NCD) worth R10,500 crore that it wants to issue against long-terms debt on its books.

Converting loans into NCDs would bring down the interest rate by about 2%, senior executives at the airline said.

The national carrier also plans to use the proceeds from a sale and lease back of wide-bodied aircraft to retire

R6,500 crore or about a fifth of its short-term debt. The sale and lease back arrangements for nine Boeing 787 aircraft are expected to fetch the airline an estimated $900 million, senior executives told FE.

The executives added that the repayment of short-term loans and some bridge loans should happen in the current year.

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