Air India, which has been seeking funds to the tune of Rs 4,000 crore from the government, may be looking to increase this demand.
Air India, which has been seeking funds to the tune of Rs 4,000 crore from the government, may be looking to increase this demand.
Top official sources confirmed to DNA that the airline has been asked to draft a fresh proposal for fund infusion and that the demand is likely to be much higher than the figure given earlier.
Last year, the loss making national carrier had sought Rs 1,231 crore as equity infusion and another Rs 2,750 crore as soft loan to improve its financial health. But the money has not been sanctioned till now largely because the airline failed to provide a well documented business growth plan for the near future.
At one time, it cited “merger” costs — referring to the costs incurred while merging the erstwhile Air India and Indian Airlines —to justify the funds infusion but this reasoning was quickly rejected by the government, which pointed out the unusual delay in completing this merger process.
Official sources confirmed that Air India is looking for more monetary support than sought earlier.
“The airline may be looking at increasing both, the equity as well as soft loan figures. Its debt equity ratio is quite unhealthy, so enhanced equity would help. And the loan would go a long way in completing its fleet augmentation programme.”
Sources indicated that in return for the government’s largesse, the airline has been asked to begin a massive cost restructuring initiative with the goal of saving as much as Rs 1,000 crore every year!
“Ever since Arvind Jadhav has taken over as CMD of Air India, First and Business Class travel has already been banned for employees. Route rationalisation has also already been achieved in quite a large measure. Now the airline has identified areas such as on-board meals, fuel wastage etc for further cost reduction”.
The airline has been asked about measures it proposes to take to improve services, on-time performance, load factors and yields (or revenues).
On the delay in integrating information technology systems of the erstwhile AI and IA, the sources said that though this process is delayed it is now being taken up in earnest. Failure to integrate IT systems could result in AI’s exit from the prestigious global airline grouping called Star Alliance.
Already, Air India’s losses for FY09 are expected to almost double to Rs 4,000 crore against Rs 2,226 crore in 2007-08. Its working capital borrowings have touched the Rs 15,000-crore mark.
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