Cabinet likely to decide on equity infusion in AI on Thursday

In addition to the Rs 1,200 crore equity,the Ministry is understood to have mooted a proposal for further infusion of Rs 2,000 crore as equity in the next financial year.

Civil Aviation Minister Praful Patel had recently said that the national carrier would require additional equity to meet its mounting debt burden in addition to the proposed Rs 1,200 crore equity.

Government intends to raise its working capital to about Rs 7,000-8,000 crore,he had indicated.

Patel had also met Prime Minister Manmohan Singh recently when the issue is understood to have come up for discussion.

The Committee of Secretaries had earlier recommended the infusion of an additional Rs 5,000 crore. In the last financial year,the government had given Rs 800 crore as equity,which was primarily used by the airline to meet its huge debt burden.

The infusion was being made in tranches to make the airline more accountable and improve its performance by enhancing revenues and cutting costs drastically.

The Air India Board,which met in Mumbai few days ago,reviewed the financial performance which showed improvement in revenue,yields and overall passenger load factors since its turnaround plan came into operation.

During April – November this year,Air India recorded network revenue of Rs 7,250 crore as against Rs 5,911 crore achieved during the corresponding period last year,reflecting a growth of 22 per cent.

According to official figures,the airline’s yield per revenue passenger kilometre on its network rose by 12.2 per cent during the period,as it registered an overall passenger load factor of 66.3 per cent between April and November,up from 63.1 per cent a year ago.

Air India has also suggested that the government provide sovereign guarantee to back the loans it has taken so far,mainly to fund its fleet expansion. Such a guarantee would help the airline restructure its debts.

The Reserve Bank recently asked the national carrier to provide a letter of support from the government due to a poor debt-equity ratio of the company.