VVIP travel: Govt owes Air India Rs 750 cr for flying high and mighty

CMD Lohani confirmed the dues but said departments and ministries had promised to clear these soon

Air India, often at the receiving end of criticism for its sloppy performance, is yet to be paid Rs 750 crore by the government for flying Very Very Important Persons and defence services.

The state-owned airline, which has steadily lost its once dominant market position to private competitors, often flies VVIPs such as the Prime Minister, ministers, and politicians with Z-category security. It also assists in evacuation operations. For instance, this year, Air India’s 144-seat Airbus A-319 evacuated people stuck in Port Blair during a cyclone.

But, its bills are yet to be cleared. “As on December 30, there are dues up to Rs 750 crore,” said a senior executive of the airline.

Air India Chairman and Managing Director Ashwani Lohani confirmed the dues, but also said departments and ministries that owed the money had promised to clear these soon. Another senior Air India official said the Ministry of Home Affairs and the Ministry of External Affairs had received a grant from the government to clear the dues. 

The airline is on an expansion mode and plans to purchase 30 aircraft this financial year. But, it is also suffering from a cash crunch, and, according to a Press Trust of India report, the airline was compelled to delay the salary of some employees in December.

In the last financial year (2015-16), the airline had made an operational profit of Rs 105 crore and had been praised by PM Narendra Modi. However, in the first two quarters of this financial year (2016-17), it is back in the red — thanks mostly to a sale-and-leaseback model.

An official of the airline said it had approached Life Insurance Corporation of India for a loan of Rs 2,500 crore for working capital. According to sources, Lohani has had a round of discussions with previous LIC chairman S K Roy about this.

It has also asked banks to convert debts into equity under the S4A scheme. Under the scheme, banks are allowed to convert unsustainable parts of debts into equity. 

A senior Air India official said the airline had performed much better than previously in the past one year. “We need government support now more than ever, as we are in the critical phase of turnaround and performing well,” the official said, pointing out that operating expenses had grown because of addition of more seats. 

According to him, over the nine months of this financial year, revenue increased by 2.76% to Rs 11,785 crore, as capacity utilisation and passenger load factor increased.

The airline had got a bailout package of Rs 30,000 crore from the previous government. It has also written to the government for more funds so that its turnaround plan does not crash.

CMD Lohani, in a letter, pointed out the airline was in an expansion mode and was leasing aircraft. So it was essential to have sufficient liquidity to take care of commitments.  He also said the airline would be forced to raise temporary loans from banks in order to bridge the liquidity gap, thus endangering the liquidity and survival of the company. Subsequently, it got a supplementary budget of Rs 800 crore for FY16.