Ai Mulls Bond Issues To Pay Salary Arrears To Employees

The Air India (AI) management is examining the possibility of coming out with two bond issues. While the first issue is a specialised float aimed at meeting the salary arrears that the airline owes its employees, the second would be a public bond issue for raising Rs 100 crore.

The first issue, to be subscribed by its employees, will be in lieu of the salary arrears that the company owes its staff.

As per the wage agreement that AI had entered into with the employees last year, the AI staff were to get the new salary scales with retrospective effect from 1992. With a staff strength of 1,800, the total arrears that the national carrier owes its staff works out to between Rs 75 crore and Rs 100 crore.

 

As per the proposal, AI plans to convert the salary arrears into bonds so that the money is not left idle and the employees can earn interest on the arrears. Besides, the move is expected to benefit those who are due to retire shortly and quell employee dissatisfaction.

With the previous wage agreement having expired on December 31 last year and a fresh wage settlement coming into effect from January 1, the AI management feels that it is all the more important to clear the arrears due from the previous wage agreement as otherwise the burden on the company will mount with the fresh wage settlement.

The national carrier is also planning to launch another public issue of bonds to raise Rs 100 crore. The Air India management also evaluating another option, of increasing the quantum of the public bond issue to Rs 150-175 crore in order to clear the employee arrears.

The company, which reported a nominal profit during the last two months after a prolonged period of mounting losses, is tying up with Bank of Baroda (BoB) to raise a $100 million FCNR (B) loan.

The company is currently discussing the interest rate to be levied on the loan. The loan will have a maturity of three years with a rollover option and will be used to meet the companys working capital requirements.

The companys liability on depreciation costs and interest outgo, too, has increased, resulting in mounting costs with the induction of six Boeing 747 400s at a cost of Rs 3,500 crore.

Earlier, the finance ministry had turned down a proposal to securitise its future revenue and raise $100 million. Therefore, the company opted for the FCNR (B) loan.