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In Budget, Air India seeks Rs 2,000 cr equity infusion
December, 28th 2010

Air India has sought an additional Rs 2,000 crore as equity infusion in Budget 2011-12, the Minister for Civil Aviation, Mr Praful Patel, said here on Monday.

The airlines earlier proposal for providing Rs 1,200 crore as equity is likely to go before the Cabinet soon. In addition, the airline has sought an additional Rs 2,000 crore in Budget 2011-12, the Minister said at an event to induct a sea plane into the fleet of Pawan Hans Helicopter Ltd.

Earlier this year, the Government provided Rs 800 crore to Air India. Official sources told Business Line that the State-owned carrier could get as much as Rs 3,000 crore during financial year 2011-12.

Staying afloat

We are hopeful that the Government will provide Rs 2,000 crore in the early part of the new financial year, while an additional Rs 1,000 crore could come towards the end of the year. What the airline does with these funds will be left to the management, sources said.

The infusion of additional equity as also the recently announced guidelines of the Reserve Bank of India on debt restructuring for the domestic airline industry will help Air India stay afloat.

The acceptance of the debt restructuring plan of Air India (which should be cleared in about a month) will see the airline debt come down to around Rs 25,000 crore from the current Rs 40,000 crore. With the Government pumping in Rs 5,000 crore as equity into the airline, it will enjoy a debt equity ratio of 1:5. This is an accepted level and banks should have no problems lending funds to the airline, sources added.

At the moment, the airline equity stands at Rs 145 crore. The airline, which had reported losses in excess of Rs 5,000 crore in the previous year, has been working on a turnaround plan to curtail them. The measures have borne fruit with the airline reporting a 22.6 per cent increase in network revenue at Rs 7,250 crore in April-November 2010 as compared with Rs 5,911 crore in the year-ago period.

Earlier this year, the airline posted a 23 per cent drop in net loss to Rs 5,551 crore for 2009-10, against Rs 7,189 crore in 2008-09.

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