The government has yet again provided languishing Indian
flag-carrier Air India with some breathing space, but has steered away from taking concrete steps to stem the rot.
A Group of Ministers (GoM), set up to look into the airline's ailing state, on Monday cleared a payment of Rs 532 crore to be made to Air India for the VVIP and rescue flights it operates. An in-principle approval was also given for an
equity infusion of Rs 1,200 crore to be made this financial year.
NECK TO NECK: Air India, pvt carriers battle it out over fares These decisions are, however, merely small mercies.
Air India's total
debt stands at Rs 46,950 crore - Rs 20,185 crore are aircraft loans, Rs 22,165 crore are working capital loans and Rs 4,489 crore (approx) are dues that the airline owes airport operators, oil marketing companies and other vendors.
According to the latest Directorate General of Civil Aviation (DGCA) figures, the airline's load factors - a measure of how full an airline's aircraft are - have fallen in June and are the lowest among all Indian carriers.
FLYING HIGH: India's domestic travel demand up 14% DGCA figures show its market share for June at just about 15 per cent, only superseding that of SpiceJet and GoAir.
So crunched is the airline for cash that it has been unable to pay salaries to its employees on time, often delaying payment by nearly a month.
In the last three years, the airline's operations have been plagued by
three major strikes by pilots, engineers and
other employees. The strikes resulted from unresolved merger-related issues like parity in wages and seniority.
The list of woes is long indeed.
OPINION: The real reason behind Air India's sorry state The airline, on its part, has proposed a turnaround and financial
restructuring plan (the plan may be a result of lenders putting stringent riders to restructure debt) whereby it has proposed issuing redeemable preference shares for about one-third of its working capital loans.
It is seeking an equity infusion of Rs 43,000 crore over the next ten years and has estimated that it needs an additional 100 planes (short- and long-range aircraft) to give it a scale of operations to generate enough money to repay debts and meet working capital needs.
In a scenario where domestic passengers are seen growing by 10.5 per cent and international growth is seen at nearly 9 per cent (as per International Air Transport Association), more aircraft could bring a larger share of the pie only if increased capacity is matched with increased efficiency in operations.
The government has already injected Rs 4,000 crore in Air India over the last two financial years, and the airline is seeking an infusion of Rs 8,373 crore in this financial year. But the GoM on Monday gave its nod for an equity infusion of only Rs 1,200 crore.
It's thus a partial relief for an airline that needs much more than additional aircraft and extra funds. The group will meet again on an undisclosed date to decide on the airline's turnaround plan and further equity infusions.
MUST READ: Foreign pilots to be phased out by 2013 For now, hopes are set on the much-awaited Boeing 787 Dreamliner. The
Dreamliner promises new routes like Melbourne, Johannesburg, Nairobi, Guangzhou, Rome, Madrid, Milan, Barcelona and others.
It also assures much more efficiency given the nature of the aircraft (it is made of composite materials that make it more fuel efficient) and ensures that the airline will no longer have to operate its long-haul Boeing 777s on medium-haul routes.
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