BackAir India said to sell assets as debt balloons to Rs40,000 crore
The company has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd
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Air India Ltd, the state-run carrier bailed out by the tax payer, plans to sell real-estate assets to trim debt that’s risen to ₹ 40,000 crore, an official with direct knowledge of the situation said.
Air India pays ₹ 3,800 crore as interest on loans taken to buy aircraft, the official said, asking not to be identified as the information is private. The Mumbai-based airline lost ₹ 36,000 crore last year, the person said.
The government-owned airline’s struggle is symptomatic of the issues faced by carriers in country’s ultra-competitive aviation industry, where one airline had to shut down operations two years ago because of mounting debt and a second carrier had to cut fleet and delay salary payment. Fares as low as 2 US cents have led to more than $10 billion in industry-wide losses in the past seven years, according to Capa Centre for Aviation.
Air India spokesman G.P. Rao declined to immediately comment.
The company has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. Its debt swelled following orders in 2005 and 2006 for 111 planes from Airbus Group NV and Boeing Co. It currently has about 23,500 employees and 108 planes.
Air India, which in 2O12 received a 300-billion-rupee taxpayer-funded bailout, needs to meet cost, revenue and load- factor targets to keep getting funds every year until 2020.
To cut costs, the carrier decided to engage in large-scale fuel hedging for the first time, taking advantage of a drop in oil prices, a person familiar with that development said earlier this month. The airline also plans to reduce its aircraft-to- manpower ratio to about 100 people per aircraft, from the current level of 218 per plane, the person said.
Air India may lease turbo-propeller planes made by France’s Avions de Transport Regional GIE for regional routes, the official said.
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