The Cabinet Committee on Economic Affairs on Thursday approved a fresh equity infusion of Rs 1,200 crore into ailing state-run carrier Air India (AI). This will improve the airline’s debt-to-equity ratio and increase the equity base to Rs 3,345 crore, making it eligible for working capital loans. As of now, it has a debt of Rs 46,950 crore on an equity base of Rs 2,145 crore.
“As Air India is passing through critical financial crunch, the equity induction would not only ease the cash flow situation of the airline but would also preclude borrowings from the markets at high costs,” said a government release.
The amount was released after Prime Minister Manmohan Singh announced in Parliament that the equity infusion plan for Air India should be expedited.
The cash-strapped airline has not been able to pay the salary for June and performance-linked incentives for May and June to its 31,000 employees.
The carrier also has to clear dues of Rs 4,500 crore it owes to various airport operators and oil marketing companies, among others. The dues include Rs 2,300 crore to oil marketing companies, around Rs 800 crore to airport operators and Rs 400 crore to other vendors.
On the top of it, the fund requirements of AI are huge. It has to repay Rs 20,415 crore worth of loans before the end of this financial year.
Of AI’s total debt, loans for aircraft buying are Rs 20,185 crore, working capital loans Rs 22,165 crore and the others are overdues.
Its accumulated losses have crossed Rs 20,000 crore, with the airline losing Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, Rs 5,551 crore in 2009-10 and Rs 6,000 crore in 2010-11.
In its turnaround plan, AI is demanding an equity infusion of Rs 43,000 crore till 2021. For the current financial year, it wants 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.
