The group of ministers (GoM) may have recommended Rs 800 crore equity assistance to Air India as a short-term measure, but this amount is unlikely to help the ailing airline in any significant way.
The GoM, which met recently under the chairmanship of finance minister Pranab Mukherjee, has recommended this amount be released as equity assistance to AI for November and December and that the money should reach the airline (subject to approval by the Parliament) by January.
But Rs 800 crore is hardly enough. The gap between revenue generation and expenditure for AI stands at over Rs 4,000 crore a year and to tide over monthly payments and other expenditure, AI has already sought enhancement in working capital limit by Rs 3,000 crore.
Official sources said that against a demand for Rs 3,000 crore, AI’s board of directors has allowed it to raise loans of Rs 1,000 crore as working capital.As on date, AI has an equity base of Rs 145 crore, working capital loans of about Rs 16,000 crore and needs about Rs 45,000 crore in tranches to complete an ambitious aircraft purchase order.
Sources also confirmed that the earlier proposal of the ministry of civil aviation, seeking about Rs 2,000 crore (over and above the equity demand of Rs 5,000 crore) as soft loan from the government is also in limbo.
“Who will give a company in such a precarious financial condition any loan? We are not discussing the soft loan proposal at all now,” the sources said.And a proposal of the AI management to reconfigure some aircraft and begin a low-cost service on select domestic routes has also been put on the backburner.
“This requires more investment for reconfiguration instead of any substantial enhancement of revenue. Also, where are the additional passengers?”Amid all this financial uncertainty about AI, the ministry of civil aviation and the airline management have still not come to a decision over employee wages. According to another official source, a broad understanding has been reached over slashing salaries across the board by 15%.
This move, if implemented, would also bring down the performance-linked incentives (PLIs) for all employees. The GoM has already made it clear that unlessAI shows revenue enhancement and cost savings of up to Rs 2,000 crore by next year, any further assistance from the government may not come. So till December, AI will manage to save justRs 300-400 crore!
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