Govt considering infusing further equity in Air India

The government may consider infusing further equity of Rs 2,000 crore in cash-starved Air India, after it is expected to grant the state-owned airline Rs1,200 crore by next month.

"We can look at pumping another Rs 2,000 crore later," civil aviation minister Praful Patel said today when asked whether the government could infuse more funds to enhance the the debt-equity ratio of the ailing national carrier.

"We have moved a Cabinet note for infusion of Rs1,200 crore equity (in Air India). It has already been circulated (to members of the Cabinet). We hope that a decision is taken by November," Patel said on the sidelines of a seminar on air traffic management here.

"Air India's overall turnover would be higher. As there is a healthy growth of air traffic, the yields are better and costs are going down," he said.

Asked whether there would be a "bailout" for private airlines also, Patel replied in the negative but said the government and the Reserve Bank have already taken several measures to come to the aid of the aviation industry.

"I don't think there is any bailout but some steps have been taken. RBI has given approval for debt restructuring as a special dispensation for the aviation sector and looking at its overall health," he said.

Earlier, high-level sources had told PTI that the national carrier might ask for another Rs 2,000 crore from the government in the next financial year to repay its massive debts, after it gets Rs 1,200 crore in this financial year.

Government had infused Rs 800 crore in the last financial year in Air India, which used to have an equity base of a mere Rs 145 crore and had placed orders for 111 aircraft - 43 from Airbus and 68 from Boeing —- worth USD 11 billion.

The sources had said that the airline would require Rs3,000 crore to Rs4,000 crore annually to pay off its debt which is primarily on account of aircraft induction.

The monthly interest burden on this count averages at Rs200 crore, while the debt each month stands at about Rs 300 crore, they had estimated.

Against this backdrop, the airline could ask for another tranche of Rs2,000 crore as equity, some time in the next financial year, the sources said.

The second tranche of government funds worth Rs1,200 crore, to be released after a nod from the Cabinet Committee on Economic Affairs (CCEA), is likely to be used for settling outstanding dues and not to enhance the airline's equity base. CCEA is likely to take up the proposal next month.

According to official estimates, Air India is expected to incur a loss of Rs5,656.62 crore in 2009-10. The airline had suffered a loss of Rs2,226.16 crore in 2007-08 which rose to Rs5,548.26 crore the following year.