Mumbai: Loss-laden national carrier Air India, grappling with the aftermath of the nation’s worst air disaster this decade and bracing for another strike by employees, finally has something to cheer.
The carrier, run by National Aviation Co. of India Ltd (Nacil), managed to narrow its operating loss by more than one-third in the fiscal that ended 31 March and at least 16 banks have queued up with offers to refinance a $475 million (Rs2,208.75 crore) aircraft acquisition loan as part of its restructuring programme.
“Lower jet fuel prices, brand new fleet and marginal savings in the wage bill have helped Air India to lower its operating loss by 36% in fiscal 2010,” said a senior government official, who did not want to be named. “The financial results are being audited by the government now. Moreover, the carrier is getting better quotes from international and domestic banks for refinancing its loans.”
The official didn’t reveal the exact operating loss posted by the airline. The operating loss for the previous fiscal hasn’t been made public yet.
In the October-December quarter, the state-owned airline had posted a 9.7% decline in net loss to Rs1,473.85 crore, from Rs1,632.23 crore in the corresponding period of last year.
An Air India executive confirmed that the carrier’s operating loss had narrowed, welcome news for an airline that piled up a cumulative loss of Rs8,461 crore in fiscal 2007, 2008 and 2009, and had been estimated to be in the red to the tune of another Rs5,400 crore in fiscal 2010.
The airline is still recovering from the 22 May crash of an aircraft in Mangalore that left at least 158 passengers and crew dead.
Two of its labour unions went on a flash strike on 25 May to protest a gag order by management directing their office bearers from making public comments that could harm the company’s image.
The strike, which lasted two days and resulted in the cancellation of at least 138 flights, was declared illegal by a court.
One of unions that Air India derecognized last week has threatened another strike starting 12 June.
According to Air India executives, the reduction in the operating loss and interest shown by banks in helping refinance the loan would help the airline on the way to cutting costs by Rs1,200 crore and enhance revenue by Rs1,200 crore, which will qualify the carrier for a Rs1,200 crore equity infusion allocated in the Union budget for 2010-11.
At present, Air India has an outstanding debt of Rs16,000 crore and is running a monthly cash deficit of Rs400 crore.
“Air India got overwhelming response with aggressive rates for a tender floated for raising $475 million that will be used to replace a loan taken from Standard Chartered Plc. At least 16 players have submitted their bids,” said the Air India executive cited above.
Global banks such as UK-based Standard Chartered, Citigroup Inc., BNP Paribas SA, Deutsche Bank AG, JPMorgan Chase and Co. and ING, are competing for the loan programme, the executive said.
Indian banks offered to help sell rupee-denominated bonds that “will cut interest cost heavily”, the executive said. Among the Indian banks are Canara Bank and Axis Bank Ltd.
Air India had taken a loan of $475 million to fund the purchase of three aircraft and one aircraft engine.
In April, Air India sold Rs795 crore of non-convertible debentures or rupee bonds to partly fund the cost of aircraft purchases.
The entire bond issue, which was backed by a sovereign guarantee or a pledge by the Union government that it will repay investors if the company is not in a position to do so when the bonds mature, was bought by Standard Chartered.
“Going by the recent rupee bond sale by Air India for various other loans, it should get fresh loans at 9%, which is very much cheaper than (a) normal bank loan,” said a Mumbai-based aviation analyst with a domestic brokerage. He did not want to be identified as he is not authorized to speak with the media.