Sovereign guarantee for Air India’s aircraft debt

Civil aviation ministry sources said the GoM decision would be place before the Cabinet for its approval. Air India,including erstwhile Indian Airlines,had ordered 111 planes worth Rs 44,000 crore in 2005.

The panel has also agreed to commit Rs 450 crore a year over the next 10 years to Air India as a soft loan to meet its working capital requirements. The cash-strapped airline has accumulated working capital loans of nearly Rs 21,200 crore and has not paid incentives to its employees for the last five months. “Cash infusion along with clearance of government dues would help us clear employees’ pay,” said the Air India executive.

While the carrier has already received Rs 3,200 crore from the government in the last three years,the GoM also approved equity infusion of Rs 6,750 crore for 2011-12,the source said. However,a string of riders have been attached to the bailout.

A group of officers set up to independently vet the airline’s financial restructuring and turnaround plan,has recommended performance milestones. It includes meeting a higher passenger load factor of 73 per cent by 2015 and 75 per cent by 2020; improving yields and other operational parameters; operationalising its workshop and ground handling operations and increasing its cargo revenue from seven per cent of passenger revenue to 10 per cent.

On Life support

The GoM chaired by Finance Minister Pranab Mukherjee has agreed to provide sovereign guarantee to Air India’s debt obligations totaling Rs 19,000 crore towards aircraft loan repayments

The Panel also agreed to commit Rs 450 crore a year over the next ten years to the carrier as a soft loan to meet its working capital requirements

Equity Infusion of Rs 6,750 crore for 2011-12 has also been approved by the GoM. Air India has already received Rs 3,200 crore in the last 3 years