The airline's management, which has undertaken an intensive drive to cut costs, is expecting most of turnover to be generated through better utilisation of aircraft as it is not planning to begin any new flights due to capacity constraints.

In fact, as part of an intensive financial restructuring exercise, Air-India is floating a $ 100 million domestic issue to meet its immediate fund requirements. Various Indian financial institutions, including the Bank of India (BoI) have evinced their keen interest to finance the plain vanilla debt issue.

In an interview to The Indian Express, M Mascarenhas, managing director of Air-India, said that the airline has sent feelers to the domesticinstitutions to finance the issue and has received a good response. The airline is currently paying an interest of Rs 185 crore per annum on the expensive working loans of Rs 1,000 crore taken earlier. It plans to swap these loans with cheaper loans to be raised in the next few months.

The presence of ICICI chairman N Vaghul on the board will help the airline to raise funds from Indian institutions, feel analysts.

The plans to go for a domestic issue was conceived after the airline scrapped its plans to go for a $ 100 million securitisation deal of its ticket receivables in the profitable Mumbai-New York sector. It had even got itself rated from Duff & Phelps and Standard and Poor's but at the last minute decided against going in for the expensive foreign exchange deal.

For the fiscal ended March 1999, the airline had recorded a operating revenue of Rs 4,015 crore but due to historical reasons like faulty wage agreements notched up losses of Rs 200 crore. In fact, due to accumulated losses, Air-India'snet worth has already eroded to Rs 393 crore from Rs 1,375 crore. By the end of fiscal 2000, it will be Rs 343 crore away from the guillotine of Board of Industrial and Financial Reconstruction (BIFR). The management, led by the managing director, is doing its best to avoid the BIFR.

With the high interest rate on its working capital loan coupled with a bloated salary bill of Rs 1,122 crore, the airline has no other option but to go for asset sales which includes sale of three Boeing 737-200s of its 24-aircraft fleet and hiving off its 100 per cent subsidiary, Hotel Corporation of India (HCI). But before that Mascarenhas expects a soft loan cum equity infusion package of Rs 2,000 crore in two tranches from the government of India, the owners of the airline, to clean up its balance sheet.

``The sale of Hotel Corporation of India will fetch around Rs 900-1000 crore while sale of Jumbos will, depending on market conditions, generate another Rs 500 crore... we expect to pay back the Government of India fromthese funds,'' Mascarenhas said. The airline will finalise the merchant banker to sell HCI in a couple of days though IFCI has emerged as a front-runner to bag the deal.

Subsequently, the airline will begin its second phase of revival which includes expanding its fleet by acquiring five medium capacity long range aircraft at a cost of Rs 2,500 crore. Each aircraft will cost $ 110-120 million which would be deployed on its profit-making Gulf and Far East routes. ``Both the government and the management is doing its best to revive the airline... we expect to turn corner by the end of next fiscal,'' hoped the managing director.