Comprehensive turnaround plan for Air India in the works

Top officials of the ministry of civil aviation and the top brass of Air India (AI) have been huddled together for two days, engaged in a comprehensive review of the financials of the ailing carrier. Since the Prime Minister’s Office (PMO) is directly monitoring this review, it has assumed much significance and the review exercise is expected to continue on Thursday too.

According to unconfirmed reports, the top aviation brains in the government and the airline have discussed threadbare a comprehensive turnaround plan, vetted by financial advisory firm Deloitte, which includes, among other things, seeking another Rs2,000 crore equity infusion over and above the Rs1200 crore the airline is expecting from the government this fiscal. If granted, this equity boost could enable the airline to negotiate with the oil companies and airport operators and get some discounts. It will also greatly improve the loss making airline’s debt equity ratio and reduce the overall interest outgo.

State-run oil companies, to which the national carrier owes around Rs2,300 crore, have already refused the airline credit from December 13 onwards, forcing it to pay them around Rs12.5 crore daily to run its domestic and international flights.

AI also owes over Rs600 crore to the Airports Authority of India. The airline’s high cost debt alone is about Rs19,000 crore.

Air India’s annual interest payment is around Rs1,800 crore and the airline has accumulated losses of over Rs15,000 crore. The carrier lost Rs2,226 crore in 2007-08, Rs7,189 crore in 2008-09, and Rs5,551 crore in 2009-10. The turnaround plan also talks about increasing domestic marketshare to over 30% by 2014, operating a fleet of 280 aircraft and around 10% of employees retiring.