Air India’s group bookings come under a cloud over shutdown fears

Forum Gandhi Mumbai | Updated on December 31, 2019 Published on December 31, 2019

Air India’s advance group bookings may have been impacted due to Civil Aviation Minister Hardeep Singh Puri’s statement in Parliament last month that “the airline will have to close down if it’s not privatised.”

The Centre has announced that it was looking to divest Air India and its subsidiaries. The national carrier has been facing an acute cash crunch for the past few fiscals. For April-November, Air India’s losses zoomed to ₹4,685 crore, as against a loss of ₹1,658 crore recorded in FY2019.

Air India has a debt book of around ₹60,000 crore, including total current liabilities of ₹15,000 crore owed to vendors, lessors, employees and airport operators.

A senior official said that Puri’s statement “was impactful on our revenues”. The group bookings account for 4-5 per cent of revenues of Air India, “but, we are correcting it,” he added.

When asked how the airline was being managed with limited funds, he said: “We will work till we can; if they (government) do not want to give us more funds, and if they ask us to shut shop, we will. We have no option.”

Air India has 125 aircraft in its fleet, while its subsidiary Air India Express has 25, and Alliance Air 19. Of the 169 aircraft in total, 20 aircraft of Air India were grounded earlier this year.

Said the official: “We have recovered eight grounded widebody aircraft including two Boeing 777s and four B787-800s (Dreamliners). Twelve Airbus A320 family aircraft are still grounded. A few of these aircraft will be used on the Mumbai-Stansted route that is set to start in February 2020.

The senior official also added that Air India needed another $150 million to pay arrears, overhaul the aircraft, and to recover the aircraft.

“We had sought a ₹2,400 -crore sovereign guarantee to mop up funds for meeting operational requirements. So far, the government has issued a ₹500-crore guarantee.” The official added that the government is unlikely to keep aside cash for the debt-strapped airline in its upcoming budget.

The official said that the whole bidding process may take “at least six months” but the airline’s survival was in danger if the process went beyond six months.

Speaking about the disinvestment plans, the senior official said that the government was planning to sell Air India and Air India Express together and Alliance Air separately.

Interestingly, among all three airlines, Air India Express is the only profitable airline at the moment.

When asked if selling Air India Express separately would make sense, he said, “ideally, it would.” However, he added, “but that’s their plan.”

Clouded prospects

Air India officials were to hold a board meeting on December 30 in Mumbai. While the agenda of the meeting was not clear, another official said that the obvious agenda was to discuss the way ahead for the airline as the company was set to invite Expressions of Interest in January 2020.

The senior official was not optimistic about the airline’s revival. Though they were looking for buyer across the globe, “in the current economic scenario, it’s doubtful,” he explained.

When asked what according to him was the reason of Air India’s downfall, he said, “merger and then the demerger.” He further explained that the aviation industry was anyway a low margin-high cost industry and survival was difficult. In addtiion, “few issues like taxation and FDI norms act as hurdles.”

The Indian aviation sector recorded operating losses of ₹6,845.78 crore during the first eight months of this financial year, its highest since FY15. If Air India doesn’t survive. it will be the sixth airline to go belly up. The others that have taken hit and have gone down are: Jet Airways, Air Costa, Air Odisha and Air Pegasus.

Air India’s spokesperson was not available for comment.

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Published on December 31, 2019
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