Air India gets Rs 1,000 crore equity
Cash-strapped Air India got a breather in the form of Rs 1,000-crore equity infusion from the government on Wednesday.
NEW DELHI: Cash-strapped Air India got a breather in the form of Rs 1,000-crore equity infusion from the government on Wednesday. The airline's unending financial stress had got worse as the Centre had so far given Rs 6,000 crore instead of the promised Rs 8,500 crore for the fiscal. As a result, AI had to bridge this gap by borrowing money from banks at 11%-12%, which increased its debt servicing burden.
Before Wednesday's infusion, the government had injected Rs 12,200 crore into AI and there was a shortfall in equity to the tune of Rs 3,574 crore — despite the airline meeting most of the milestone-linked equity targets — leading to a liquidity crunch. The airline's aircraft and working capital debt was Rs 26,033 crore and Rs 21,125 crore respectively on December 31, 2013. The airline is expected to lose Rs 3,990 crore this fiscal. "The money which we have received will go towards three pressing requirements — paying oil companies, airports and salaries. The vote on account has made a provision of Rs 5,500 crore for AI and the budget by the next government will decide our finances," said an official.
Both aviation ministry and AI top brass say AI will be one of the biggest headaches for the next government as they will have to decide — fast — how AI survives and in what form. "The airline faces tremendous uncertainty because of its precarious financial condition. While a lot of improvement has taken place, the bottom line is that AI still spends more than what it earns. Add to that the baggage of huge loan, it is going to be a jigsaw for the next government," said a source.
Before Wednesday's infusion, the government had injected Rs 12,200 crore into AI and there was a shortfall in equity to the tune of Rs 3,574 crore — despite the airline meeting most of the milestone-linked equity targets — leading to a liquidity crunch. The airline's aircraft and working capital debt was Rs 26,033 crore and Rs 21,125 crore respectively on December 31, 2013. The airline is expected to lose Rs 3,990 crore this fiscal. "The money which we have received will go towards three pressing requirements — paying oil companies, airports and salaries. The vote on account has made a provision of Rs 5,500 crore for AI and the budget by the next government will decide our finances," said an official.
Both aviation ministry and AI top brass say AI will be one of the biggest headaches for the next government as they will have to decide — fast — how AI survives and in what form. "The airline faces tremendous uncertainty because of its precarious financial condition. While a lot of improvement has taken place, the bottom line is that AI still spends more than what it earns. Add to that the baggage of huge loan, it is going to be a jigsaw for the next government," said a source.
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