Mumbai: State-run Air India Ltd could seek financial assistance from the Centre during the winter session of parliament, if it fails to raise ₹500 crore in short-term debt from banks, a senior official of the national carrier said. If its plan to raise the money from banks is successful, the airline will utilize the proceeds to meet its working capital requirements and service the interest on outstanding loans.
“The loan should materialize in the coming fortnight or so," said the Air India official, requesting anonymity. “If the short-term loan doesn’t come through, we will wait for the (equity) infusion from the government, which will happen during the winter session of parliament."
“If needed we will seek financial assistance from the government," he said, adding that the cash-strapped airline will not be raising any more debt, beyond the short-term loan in the current fiscal.
Air India, which is reeling under a huge debt of ₹ 55,000 crore, including working capital debt of over ₹ 35,000 crore, has been struggling to raise funds. It has been losing money every year since it was merged with Indian Airlines in 2011, and had to borrow regularly to meet its working capital needs.
In September, Air India had invited bids to raise ₹ 500 crore through a short-term loan, but it failed to get any response even after extending the deadline to 31 October. It had, however, managed to get a loan of ₹ 1,000 crore from National Small Savings Fund (NSSF).
The latest fundraising plan, if successful, will exhaust the sovereign annual guarantee limit of ₹ 2,000 crore offered by the government to the loss-making airline.
In August, Air India had raised ₹ 1,500 crore from Bank of Baroda (BoB) under a sovereign guarantee to service bank loans and dues of international vendors, including leasing companies.
Indian airlines, including Air India, were hammered by high costs, especially rising jet fuel prices and a weak rupee in the past few quarters. However, now that the oil prices are on a decline, and the rupee has strengthened, airlines are optimistic about reporting better financial results in the coming quarters.
In the past one year, the rupee has weakened 9.57% against the dollar. Oil prices are currently down 28.2% from their 2018 peak of $86.29 per barrel on 3 October.