GoM meets for another equity infusion for AI

The group of ministers (GoM) will meet on Monday to take stock of the financial liabilities and losses of debt-ridden national carrier Air India (AI) is expected to take a decision for a fresh equity infusion of Rs 1,200 crore, which would be sent to the Cabinet Committee on Economic Affairs (CCEA) for its approval.


The airline is currently tottering under a debt mountain estimated at around Rs 67,000 crore.
Air India's management is eagerly waiting an immediate response from the government to infuse additional funds to boost its rapidly dwindling financial position. The government has already injected Rs 2,000 crore in two tranches, raising its equity base to Rs 2,145 crore.
According to current financial estimates, Air India has notched up a net cumulative loss of Rs 20,320 crore between April 2007 and March 2011 while its debt burden is hovering at Rs 46,950 crore. This includes Rs 20,185 crore for loans availed of to procure aircraft and Rs 22,165 crore as working capital loans, besides an overdue of around Rs 4,600 crore.
The GoM is also looking at the financial feasibility of the airline that has to repay around Rs 20,415 crore by the end of March, 2012. According to airline officials, if the airline defaults on this amount, banks including nationalised banks would blacklist it and initiate action.
As part of its turnaround and financial restructuring plans the airline has proposed to issue redeemable preference shares for about Rs 7,400 crore at eight per cent interest out of the Rs 22,165 crore working capital loans. It also proposes steps to enable it repay over Rs 11,100 crore of loans at 11 per cent interest over a 15-year period.
According to the airline officials, it is looking at another equity infusion of Rs 30,584 crore through funding of principal and interest repayments for guaranteed aircraft loans up to FY 2021 which is also part of its financial restructuring plan. This, along with the upfront equity infusion and money to fund cash deficits, would take the total equity infusion till FY 2021 to Rs 49,920 crore.
The airline has largely failed to initiate the turnaround plan initiated in August last year which called for cut in costs by Rs 1,500 crore and increasing revenues by Rs 1,200 crore by the end of 2012, missing the target.