Air India to get Rs 30,000-cr over 9 years; lifeline comes with riders

Shishir Sinha New Delhi | Updated on November 15, 2017 Published on April 12, 2012

air india

The Government has approved a Rs 30,000-crore-plus package for cash-strapped Air India. However, this money will be paid subject to the airline achieving certain milestones. The package is for 2012-21.

Under the plans titled ‘Turnaround (TAP)' and ‘Financial Restructuring (FRP)', the debt-laden airline will be helped to restructure its operations as well as finances. Restructuring of finances will be done by reducing the interest burden and infusion of additional equity capital.

It has also been decided to hive off ground handling and MRO (maintenance, repairs and overhaul) business of Air India into strategic business units. Around 12,000 employees will be transferred to the ground handling unit while 7,000 will be moved to the MRO unit. This will substantially cut the staff numbers for the airline from the current total of over 30,000.

The ground handling unit will have equity support of Rs 393 crore over a period of 10 years, while the MRO unit will get Rs 375 crore equity over three years.

“The Cabinet Committee of Economic Affairs (CCEA) has approved the turnaround plan,” Mr Ajit Singh, Civil Aviation Minister, announced on Thursday. The CCEA also approved the induction of Boeing 787, or ‘Dreamliner' aircraft, into the Air India fleet. The first of 27 such planes is likely to be delivered next month after a delay of almost three years.

At present, Air India has a working capital loan of nearly Rs 21,800 crore. Under the FRP, Rs 11,000 crore of this loan will be converted into long-term debt with longer maturity. The first year's interest would accumulate in a funded interest term plan. All this would lead to substantial savings of about Rs 1,000 crore in 2012-13 itself.

Under the new arrangement, Air India will get 15 years for repayment against the current term of 10 years. The airline has to pay interest at the rate of 12 to 14 per cent on short-term working capital loans, adding an annual burden of over Rs 2,600 crore. There are also plans to issue non-convertible debentures amounting to Rs 7,400 crore, with sovereign guarantee. Money collected through the bonds will be utilised for paying the lenders.


Published on April 12, 2012
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