Business Today
Govt to infuse Rs 2,100 crore into debt-ridden Air India
After putting disinvestment of debt-ridden Air India on the back burner, the government is set to infuse Rs 2,100 crore into the loss-making national carrier.
Govt to infuse Rs 2,100 crore into debt-ridden Air India

Govt to infuse Rs 2,100 crore into debt-ridden Air India

After putting disinvestment of debt-ridden Air India on the back burner, the government is set to infuse Rs 2,100 crore into the loss-making national carrier. The Maharajah will get these funds as part of government guaranteed borrowing, Secretary in the Ministry of Civil Aviation RN Chaubey said.

The turnaround plan for Air India was so futile that even after pumping in Rs 28,000 crore into the airline, it could barely generate operating profits of Rs 403.03 crore in two financial years (2015-16 and  2016-17).

On an average, the state-run carrier gets Rs 4,600-crore annual bailout package every year. But it only serves a mere 12.4 per cent of the domestic passenger traffic and 16.55 per cent passenger traffic on international routes.

The government's plan to sell off debt-laden Air India resulted in a damp squib as the proposed strategic stake sale failed to take off in May. Not even a single buyer turned up to bid for the money-guzzling airline.

A Turnaround Plan (TAP) as well as a Financial Restructuring Plan (FRP) were approved for Air India by the previous UPA regime in 2012.Under these plans, the airline is to get budgetary support amounting to Rs. 30,231 crore over a ten-year period and also equity support for the payment of principal/ interest of the non-convertible debentures.

So far, the airline has received more than Rs. 27,000 crore worth equity infusion. The carrier's debt burden was more than Rs. 48,000 crore at the end of March 2017.

As per the disinvestment plan, which did not elicit any preliminary bids, the government had proposed to offload 76 per cent equity share capital of the national carrier as well as transfer the management control to private players.

The transaction would have involve Air India, its low cost arm Air India Express and Air India SATS Airport Services Pvt Ltd. The latter is an equal joint venture between the national carrier and Singapore-based SATS Ltd, according to the preliminary information memorandum.

According to aviation consulting firm CAPA India, domestic airlines are expected to post combined losses of up to $1.9 billion this financial year led by full-service carriers like Air India and Jet Airways driven by rising costs and low air fares.

Get latest news & live updates on the go on your phone with our News App. Download The Business Today news app on your device
More from SECTORS