Air India on Revival Mode, Looks to Wipe off Losses in 6 Years


New Delhi, Apr 22 (PTI): Ailing Air India, which would get equity infusion of Rs 30,000 crore till 2021 as part of its turnaround plan, expects to wipe off its losses and become cash positive in the next five-six years, official sources said today.

The airline, which would get an upfront equity infusion of Rs 6,750 crore this financial year, estimates that it would slash its current yearly operating loss of Rs 1,700 crore to just Rs 23 crore in five years and become cash positive by 2018, top Air India officials said.

The estimations are based on the assumption that the airline's turnaround plan (TAP) and the financial restructuring plan (FRP), now approved by the government, would be implemented as planned.

Apart from deciding to infuse additional equity worth Rs 30,231 crore between 2012 and 2021, the government 10 days ago also approved hiving off its engineering and ground handling services into two wholly-owned subsidiaries that would reduce its employee-aircraft ratio to 100 from 224 now.

Air India has also been allowed to issue government- guaranteed non-convertible debentures (NCDs) worth Rs 7,400 crore to its lenders, like financial institutions, banks, LIC and EPFO. These NCDs would be used to repay part of the airline's close to Rs 21,200 crore working capital loans.

The debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore long-term loan on fleet acquisition, Rs 4,600 crore vendor dues, besides an accumulated loss of Rs 20,320 crore.

The officials said Air India was now on a revival mode and "our fundamentals are strong".

The airline posted a healthy 46 per cent revenue growth last month over March 2011. While its yields on domestic sector had a significant improvement of 38.5 per cent, its seat factor also rose nearly 7.9 per cent. On international routes too, Air India put up a good performance, clocking nearly 33 per cent growth in passenger revenue. The higher growth came on the back of an eight per cent jump in load factor and higher yields at 28 per cent.

The officials said the turnaround and financial restructuring plans would give the national carrier a cash deficit support of Rs 4,552 crore till 2021, as also equity for the already-guaranteed loan of Rs 18,929 crore till the same period for aircraft acquisition.

The SBI-led consortium of banks has also approved conversion of short-term working capital loans of Rs 11,000 crore into long-term loans.

Under the revamp plan, the airline would have to maintain on-time performance of up to 90 per cent, passenger load factor (PLF) of about 73 per cent and improving its yields per revenue kilometre by at least 5-10 per cent.

The officials said the airline would aim at raising PLF to 75 per cent by 2018 on the global routes as it would be aided by a considerable fleet of long-haul Boeing 787-8 Dreamliners. The acquisition of 27 of these planes on sale and leaseback basis has also been approved.

In five years, it would add 130 new aircraft and retire 37 older planes, almost doubling its fleet to around 200.

The hiving off of engineering and ground handling services into two subsidiaries -- Air India Engineering Services Limited and Air India Air Transport Services Limited, would reduce the the airline's workforce by 19,000 from a total of about 28,000 employees.

Another focus area would be to improve aircraft utilisation to international standards, the officials added.

  

Top Stories

Comment on this article

  • anna, Mangalore/mangalore

    Mon, Apr 23 2012

    Air India can wipe out lossess only if govt allots 30000 crores each year for next 6 years !!!!!!

    DisAgree Agree Reply Report Abuse

  • A. S. Mathew, U.S.A.

    Mon, Apr 23 2012

    If Air India is hoping to survive,
    it has to totally reform with an
    international crew, especially the cabin crew. Air India's passenger/
    employee ratio is perhaps the highest in the world however, the customer satisfaction is keeping at very low rate for all these years. How the lost customers can be attracted back to Air India with the same old unfriendly
    and irresponsible attitude received from the employees who were brainwashed in a rotten attitude of " we don't care whether you fly in AI or not"?
    I am afraid that the new formulas
    can create any new miracle for AI!

    DisAgree Agree Reply Report Abuse

  • jamil ahmed, udupi/qatar

    Sun, Apr 22 2012

    This equation is presumably not practical. However being a national career, it is proposed to privatization with an international airline operator will be an ideal solution on a long term basis. Rate of returns after almost six (6) years is a long period, and may be a new debts (losses) will get accrued. What are the contingency plans to avoid such unforeseen debts? Are we going to have new aircrafts (replacing the old ones?). What is the strategy Air India going to adopt.

    DisAgree [1] Agree [6] Reply Report Abuse


Leave a Comment

Title: Air India on Revival Mode, Looks to Wipe off Losses in 6 Years



You have 2000 characters left.

Disclaimer:

Please write your correct name and email address. Kindly do not post any personal, abusive, defamatory, infringing, obscene, indecent, discriminatory or unlawful or similar comments. Daijiworld.com will not be responsible for any defamatory message posted under this article.

Please note that sending false messages to insult, defame, intimidate, mislead or deceive people or to intentionally cause public disorder is punishable under law. It is obligatory on Daijiworld to provide the IP address and other details of senders of such comments, to the authority concerned upon request.

Hence, sending offensive comments using daijiworld will be purely at your own risk, and in no way will Daijiworld.com be held responsible.