The Hindu Business Line : AI closer to raising equity base to Rs 945 cr

The Ministry of Civil Aviation will soon send a note to the Union Cabinet seeking its approval for an equity infusion of Rs 800 crore into the State-owned airline.

“The minutes of the Group of Ministers’ meeting where the equity proposal was approved has been received. We can now start the process of getting Cabinet approval for release of the funds,” a senior Government official told Business Line.

Official sources pointed out that Air India has never received budgetary support except for Rs 568 crore — through a mixture of equity and loan — which was recapitalised to Rs 145 crore after the merger of Air India and Indian Airlines.

“In the past, fleet acquisition was financed through internal resources. But, now, given the gap of about 20 years between aircraft acquisition and the magnitude of debt burden and falling revenues, some financial support from the Government, which is our major shareholder, is needed,” sources said justifying the Government pumping in funds into the airline.

As and when the funds are released, Air India will join a growing number of global airlines that have been provided with more than $5 billion by various governments since 2001.

On its part, the airline has taken a number of steps including renegotiating catering contracts; implementing a the Geneva-based International Air Transport Association (IATA) fuel saving programme, more popularly known as FEGA; and senior management taking voluntary pay cuts, which has resulted in saving of Rs 400 crore so far.

Incidentally, the airline’s monthly loss is also about Rs 400 crore. The airline reported a loss after tax of Rs 5,448.26 crore in 2008-09, more than double of the about Rs 2,200-crore loss reported in the previous year.

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