Air India board clears debt restructuring plan

The Air India board, in a meeting in Mumbai yesterday, cleared the debt restructuring plan of the airline. The plan was prepared by SBI Capital market Ltd (SBICAPS) and vetted by financial advisory firm Delloite, after the Reserve Bank of India asked the airline to get it done by an independent firm.

“The plan will now be discussed by the civil aviation ministry and the RBI, and our high-cost debt will be converted to low-cost. As of now, there is no limit on the amount of loan to be converted but we would want maximum conversion,” said a senior Air India official, who did not want to be identified.

The carrier’s working capital debt of Rs 21,000 crore was borrowed at an interest rate of 12 per cent. The airline’s annual interest payment is Rs 1,800 crore on a debt of Rs 40,000 crore (Rs 21,000 crore is working capital debt and the rest low-cost debt taken primarily to buy aircraft). The airline has accumulated losses of Rs 15,000 crore. The carrier lost Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, and Rs 5,551 crore in 2009-10.

The official added that the government will have to infuse more money in the airline. In the Budget, the government has announced it would infuse Rs 1,200 crore in the next financial year. Till now, the government has injected Rs 1,200 crore and Rs 800 crore in two tranches in 2009-10, raising the equity base to Rs 2,145 crore.

The airline also has a plan to recover its money from the government and other airlines. The plan includes recovering Rs 803 crore in dues from the government for usage of aircraft for VIP travel and emergencies. The airline operates such flights on a no profit/loss basis.

The company will also recover another Rs 152 crore due from private airlines such as Kingfisher for ground handling operations and support. The airline also got permission to sell its property in Paris, which will give them Rs 10 crore.

Meanwhile, the Air India board has constituted an independent committee of experts under a retired judge to look into the issues of pay parity and other related matters between the employees of the erstwhile airlines. The committee will be headed by retired justice D N Dharmadhikari.