AI seeks Rs 20K crore in bailout package

The airline’s survival kit cost which has now swollen to Rs 20,000 crore in the form of government assistance may not find many takers,especially as the government exchequer is considerably constrained. In fact,civil aviation minister Praful Patel had made his displeasure over Air India’s demands known after he met the Prime Minister last month and said the bailout did not mean endless cheques being written by the government in support of Air India.

The CoS has now asked the finance ministry to critically examine the extent of assistance to be given to Air India. The petroleum ministry has been asked to extend the credit limit to the company for three months initially. The Indian Express had first reported about Air India’s wishlist entailing a Rs 16,000-crore bailout that included a mix of equity infusion,soft loan and a grant. In the presentation today to the CoS,headed by cabinet secretary KM Chandrasekhar,the Air India CMD Arvind Jadhav is believed to have given an ambitious plan for cost cutting,including trimming of the Productivity-Linked Incentives,which account for half of the airline’s Rs 4,000-crore wage bill. He also enumerated steps for revenue enhancement and financial restructuring. “SBI Caps has done a quick review whereby it has proposed an equity infusion of Rs 10,000 crore and a soft loan of the same amount in the next three years. In addition,the company has asked for conversion of around Rs 10,000 crore of total working capital limit into a term loan,” said the official. Conversion of working capital into a term loan would bring down the interest rate from the current levels of 12-13 per cent and reduce the interest burden on the beleaguered airline.

The CoS,which includes finance secretary Ashok Chawla and civil aviation secretary M Nambiar,was also apprised of the decision of the Air India Board to cancel the delivery of six of the Boeing 777s out of the total 111 aircraft that are being acquired by the airline. However,the airline was told that any assistance from the government would have to be matched by aggressive cost reduction and better revenue management.

Air India has been told to come up with a concrete cost reduction proposal and replacement of the current Productivity Linked Incentive (PLI) with an alternative scheme within the framework of the Department of Public Enterprises’ guidelines.