Air India will, for the first time, raise $330 million (Rs 2,000 crore) through the external commercial borrowings (ECB) route. The money will spent on aircraft maintenance, said civil aviation ministry officials.
“Once this money is raised, Air India will utilise it on improving fleet maintenance,” said officials. At any point of time, Air India has only 52-54 of its narrow body aircraft in working condition, in an overall fleet strength of 62 aircraft. Air India has hived off its aircraft maintenance, repair and overhaul services division into a separate subsidiary, which now provides services to other airlines too. The money raised will be utilised by this subsidiary.
Air India is raising the money through a consortium of two to three banks. Due-deligence has been done and processes have been followed. “We have already negotiated with banks,” said officials. The money is expected to flow in anytime now. The government will be the guarantor for the loans, said the officials.
The ECB dispensation for airlines came in 2012 in the light of the precarious financial condition of the airline companies.
Airlines can raise loans through ECB to the tune of $1 billion. Jet Airways was the first to raise $290 million through ECB in 2012. Another $40-50 million was raised by GoAir. Air India is the third carrier to go for ECB loans.
In 2012, the provisions to raise money through ECB was made for only two years, till 2014. But later it was extended to 2015, and now has been extended to 2016. The officials said that if there aren’t any more extensions, the ECB scheme, provided by the Reserve Bank of India will expire by the end of the current fiscal.
Air India’s on-time performance (OTP) in June stood at 75.7%, one of the lowest in the industry, is just above SpiceJet, which had the OTP of 60.2%. In 2012, the government had started Air India’s turnaround plan (TAP) to restructure the carrier and make it profitable.
As per the restructuring plan, the desired OTP for Air India is above 90%. Only two airlines Air Costa and Vistara had OTP above 90% in June.
In addition to the ECB, Air India has received a Rs 30,000-crore bailout package spread over nine years from the government. In the current fiscal, the civil aviation ministry has aksed for an additional Rs 1,700 crore in form of supplementary grant. This is over and above the Rs 2,500 crore sanctioned by the government in the Budget, and a part of the turanaround plan.
According to the turnaround plan, Air India is expected to make its operational profits in the current fiscal after a decade of losses.
1.In 2012, the provisions to raise money through ECB was made for only two years, till 2014. But later it was extended to 2015, and now has been extended to 2016.
2.Airlines can raise loans through ECB to the tune of $1 billion.