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Air India may soon be wheeled out of the ICU. A Group of Ministers (GoM) has recommended an equity infusion of Rs 23,000 crore into it, over 10 years. This includes Rs 6,600 crore for the current financial year.
Half the sum
Air India had asked for Rs 43,000 crore but the GoM, headed by the Finance Minister Mr Pranab Mukherjee, said that half the sum would do. The Cabinet will now have to approve the proposal.
A former Chairman and Managing Director of AI, Mr V. Thulasidas, felt that whatever amount the Government plans to provide should be made available in one go. “The Government can decide on the amount. Some amount can be provided as equity and the rest in the form of letter of comfort. Public sector banks could also be asked to pick up equity.
“But the funds should be provided only if the airline agrees to certain goals being achieved which help cut expenditure and increase revenues. They should also look at completing the merger process without further delay,” Mr Thulasidas added.
Seven scenarios
Sources said that “The Group considered seven scenarios for equity infusion. Finally, it zeroed in on a situation where the seat load factor has to be raised from 69.5 per cent currently to 73 per cent in 2015 and 75 per cent in 2020.”
The GoM has also asked the Reserve Bank of India to give its views, within seven days, on the debt restructuring related to Air India's short-term loans amounting to Rs 22,000 crore.
The Civil Aviation Minister, Mr Vayalar Ravi, told reporters that only after the RBI's views are received will the Cabinet take a call on equity infusion.
Air India also has a long-term debt of Rs 22,000 crore as also dues to various vendors including oil companies.
Over the past few years, several governments have handed out taxpayers' money to national airlines. Most recently, the Japanese Government infused funds into the cash-strapped Japan Airlines.
Extend credit
The Group has also asked the Oil Ministry to tell the oil marketing companies to extend credit for three months to help in paying salaries. This facility was first given in August but only for two months.
Dreamliner induction
The Cabinet is also likely to consider the induction plan for Dreamliners soon. “We may put forward two options for the Dreamliner. First to truncate the order and second to have a sale and lease back,” a senior Civil Aviation Ministry official said.
Air India has ordered 27 Dreamliners.
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