Air India will start making operating profit five years after its turnaround plan is implemented, says the revised outlook of the company. The new plan is likely to be discussed in the meeting of the group of ministers to be held next week.
Air India had earlier projected it would start making operating profits from the first year after the turnaround plan is implemented. A finance ministry sub-committee, formed to review the initial plan, had asked the airline to revise its projections and targets since in the earlier turnaround plan, which projects operational profit from the first year itself.
“According to the revised plan, we will start making operational profit after five years of the implementation of the plan and become a profitable airline in three years after that,” said a senior Air India official, requesting anonymity. The carrier has accumulated losses of Rs 20,000 crore since 2007.
The projections in the new turnaround plan are on the basis of a growth rate of 12 per cent per annum annum compared to a growth rate of 18 per cent in the earlier plan.
Under the new plan, the airline has demanded an equity infusion of Rs 43,000 crore till 2021. For the current year, it wants infusion of Rs 8,373 crore, an upfront equity infusion of Rs 6,600 crore and support of Rs 1,772 crore in the form of a guarantee on short-term loans for this financial year.
Of this, the government had already infused Rs 1,200 crore in the current financial year.
As part of its restructuring plans, the airline proposes to issue redeemable preference shares for Rs 7,400 crore of the Rs 22,165 crore working capital loans, with eight per cent dividend. It also proposes steps to enable it to repay Rs 11,100 crore of loans at 11 per cent interest over a 15-year period.
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The fund requirements of the cash-strapped airline are huge. It has to repay Rs 20,415 crore worth of loans before the end of this financial year. AI has Rs 42,350 crore of debts in all — Rs 20,185 crore aircraft loans, Rs 22,165 crore working capital loans, and the others being overdue.
Its fleet induction plan, till 2014-15, with a fleet of 133 planes, has also been scaled down to 233 compared to the earlier plan of adding 272 aircraft. The induction will be a mix of long-haul, short-haul and smaller planes.
“Had we inducted 272 airplanes, we would have made profits much earlier,” said the official.
The official said the Boeing 787 Dreamliners are a key component of the airline turnaround plan and should join their fleet. “The 787s will be a game changer. It is a next generation aircraft and also consumes 20 per cent less fuel. Above all, we require a medium-haul aircraft to make our medium haul routes profitable,” he said.
The officer said 787s will replace all the Boeing 777s, which will deployed in long-haul international routes, and Airbus 319s and 321s that will be deployed in the domestic routes.
“We aim to have a market share of 30 per cent in five years and that target is the same in the new turnaround plan also,” he said.