In what could cripple its operations, the vendors of Air India (AI) have served an ultimatum that until the airline clears their dues, they would stop supplying spare parts to it on credit. The rattled management of AI has dashed off a communication to the civil aviation ministry for help, stating that it would not be able to pay salaries beyond the end of current financial year in the absence of equity infusion by the government. It has even hinted at the possibility of a default in loan repayment to finance the purchase of Airbus aircraft.
The airline has said it needs an immediate cash support of Rs 3,000 crore to stay afloat and has urged the government to urgently release the second tranche of Rs 1,200 crore as part of the Rs 5,000-crore bailout package approved by the government earlier this year. So far, the government has provided it with Rs 800 crore. AI has a accumulated losses of around Rs 14,000 crore and total debt nearing Rs 40,000 crore.
A few weeks ago, oil marketing companies had also threatened to stop the supply of aviation turbine fuel to the carrier due to delays in payment of dues of about Rs 1,070 crore.
“There is an immediate requirement of Rs 3,000 crore to clear the dues of oil companies, spare part vendors and wage-related expenses,” the airline has told the civil aviation ministry.
Sources said the aviation ministry was readying a Cabinet note that would work out the modalities as to how the funds would be released to the carrier in a phased manner.
?We have told the government that the airline would need over and above Rs 1,200 crore as equity support to bring the debt-equity ratio of 1:5,? an AI official said.
The airline has proposed to convert its working capital loan into term loan with longer repayment period. It has also decided to extend the tenure of the pre-delivery loans due to delay in delivery of aircraft. Boeing has failed to deliver B787 to AI as per the schedule agreed by the two parties in the contract.
Of late, the airline has been witnessing an improvement in its market share on the back of an increased passenger carriage. For instance, its market share in the domestic market has increased from 16.3% in 2008 to 17.8% as on September 2010.
