New Delhi: Ailing Air India’s turnaround plan, including restructuring of its massive debt, would come up before a Group of Ministers for approval in a few weeks.
“The turnaround plan has been approved by the bankers. ... Now it needs to go to a Group of Ministers (GoM) and it should happen very fast ... within the next couple of weeks,” civil aviation minister Vayalar Ravi said.
To questions on further equity infusion by the government in the cash-strapped national carrier, he said his ministry was holding “regular dialogue with the finance ministry. We will continue this dialogue and go to the GoM when necessary”.
Government has already set aside a provision of Rs 1,200 crore in the budget for infusing equity in Air India in this financial year. Till now, the government has injected Rs 1,200 crore and Rs 800 crore in two tranches in 2009-10, raising the national carrier’s equity base to Rs 2,145 crore.
Ravi said all issues, including routes from which Air India has withdrawn, were under discussion and would be taken up by the GoM.
Asked about the oil companies restricting jet fuel supplies and putting the national carrier on a cash-and-carry payment mode over non-payment of dues, he said, “Everything has been settled and there is a regular supply (of aviation turbine fuel) now.”
In a relief for Air India, state-run oil companies were yesterday directed to meet the carrier’s requirements for three months to allow it to fully restore its operations. Air India had been curtailing and combining about 15% of its 320 daily flights for the past several weeks due to fuel shortage.
With the airline announcing plans to become operationally profitable in four years, nearly 20 of its lenders (banks) have indicated that they were willing to consider recasting its entire Rs 40,000 crore debt. Its annual interest payment on this debt is around Rs 1,800 crore.
Under the turnaround plan, the cash-strapped airline has set a target of enhancing revenues by Rs 5,000 crore and slash costs by Rs 4,000 crore per annum, making it operationally profitable by 2015.
The airline is saddled with a debt of about Rs 40,000 crore, of which Rs 18,000 crore is working capital loans taken from a consortium of banks and the balance of Rs 22,000 crore is towards payment for new aircraft ordered.
The ailing national carrier had in March accepted a corporate debt restructuring package prepared by SBI Caps and vetted by Deloitte. The package was approved after several rounds of consultations with banks and the government.
Once finalised, the plan would be submitted to RBI for approval. If the RBI agrees to the proposal, Air India will be able to reduce the interest rate on its working capital loans to 6-6.5 per cent from the present 12%, thereby considerably reducing its debt servicing burden.