Air India's top management, led by its Chairman and Managing Director, Mr Arvind Jadhav, met with its consortium of bankers on Friday to share some details of the airline's turnaround plan as well as the Financial Restructuring Plan (FRP).

The bankers expect the final blueprint of the turnaround plan and FRP to be ready in another three months.

Sharing the details of the turnaround plan, Mr Jadhav told the bankers that Air India has set a target to enhance revenues by Rs 5,000 crore and reduce costs by Rs 4,000 crore a year.

He added that the turnaround plan includes a five-step process with equity infusion, conversion of short-term loans to long-term loans, reduction of interest rates, operationalisation of maintenance and repair operations (MRO) and ground-handling subsidiaries and finally resolving the integration issues with Indian Airlines.

The bankers were satisfied with the proposals of the turnaround plan.

“Almost 90 per cent of the proposals are fine with us and we are keen that the airline gets back to good health,” said Bank of Baroda's General Manager for Wholesale Banking, Mr N. Ramani, after the meeting.

He added that the banks are open to recast the Rs 18,000-crore working capital loan.

“Whether working capital or other loans, loans have to be serviced. We have no problem in restructuring the entire Rs 40,000 crore debt of the national carrier because despite challenging times, they have not defaulted on a single payment to us so far,” said Mr Ramani.

“It was a preliminary meeting. We cannot share the details. We will be meeting them many more times. Once we lenders and the company management agree on the final proposal, it will go to the Government and Reserve Bank and then we will have the turnaround plan rolling,” said Punjab & Sind Bank General Manager, Mr H.P. Singh.

If the RBI agrees to the proposals in the turnaround plan and FRP, Air India will be able to reduce the interest rate on its working capital loans to 6-6.5 per cent from the present 12 per cent, thereby considerably reducing its debt servicing burden.

An Air India spokesperson said that both the turnaround plan and FRP, prepared by SBI Caps and subsequently vetted by independent aviation consultancy firm Deloitte, have the approval of Air India board.

The airline has a total debt of about Rs 40,000 crore of which Rs 18,000 crore is working capital loans taken from a consortium of banks, while the balance Rs 22,000 crore worth of loans is towards payment of new aircraft ordered.

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