With no buyer in sight, AI fast losing altitude


The Hindu

Write Comment     |     E-Mail To a Friend     |     Facebook     |     Twitter     |     Print


Notching up a daily loss of ₹20 crore and reeling under a ₹30,000-crore debt burden, airline may soon be grounded

Making a daily loss of ₹20 crore, Air India (AI), the country’s struggling national carrier, is staring at closure unless it quickly finds a buyer, a senior official said.

“The situation is getting stretched day after day. How long can this last? We are somehow managing to keep operations on,” said the official, asking not be identified.

 

Recently, Union Minister for Civil Aviation Hardeep Singh Puri had made it clear that the government would shut down AI if it did not find a buyer.

AI currently has a debt of more than ₹30,000 crore after the government moved an equal sum to Air India Assets Holding Ltd., an entity that owns the airline’s assets.

Currently, AI’s main problem is to augment funds to pay a monthly interest of ₹225 crore towards the huge loan it has on its balance sheet. A default may spell disaster like that experienced by Jet Airways. Nine months ago, the Centre had stopped giving any financial support to the bleeding carrier and asked AI to fend for itself till the disinvestment process was completed.

Though the government had made its intention to sell its 100% stake in AI that had been bleeding badly since 2007, hardly anyone has evinced interest.
Prospects back out

The Tatas, who had earlier shown interest, are believed to have backed out as they are focussed on stabilising Vistara and AirAsia India, both loss-making joint ventures. Besides, they have chalked out overseas expansion plans for Vistara for which they have to commit more funds.

A businessman who was informally approached by the government is believed to have developed cold feet after considering the enormity of AI’s problems. IndiGo had already said ‘no’ to buying into AI. So, though the government is expected to invite Expressions of Interest (EoI) for AI shortly, it is likely to witness a lukewarm response. The only hope is that some Gulf-based carriers, backed by huge sovereign capital, might evince interest in the proposal.

On sale are loss-making AI, its wholly owned, profitable, low-cost subsidiary Air India Charters Ltd. which operates under the Air India Express brand and Air India’s 100% stake in Air India SATS Airports Pvt. Ltd.

The government had asked the AI management to run the airline on its own till the disinvestment was complete. A request to provide a sovereign guarantee for bank loans to meet debt servicing obligations was rejected forcing AI to fend for itself.

Out of the sovereign guarantee agreed upon last year, the government had vouched for ₹2,600 crore and is now unwilling to stand guarantee for the balance ₹2,400 crore. Since April 2019, the government has advanced ₹500 crore to AI but this was from the previous year’s funds.
Daily income helping

AI is running its operations through daily income from ticket sales and bank loans. Oil companies are supplying jet fuel against immediate cash payment at airports (cash and carry), and its vendors are patient enough to continue the supplies. AI is paying salaries to employees but with delays. The pilots have moved court claiming ₹50 crore in outstanding payment. In the past few months, with difficulty, the airline brought into service eight wide-body planes, grounded due to maintenance and spare parts issues.

Around 12 narrow body planes are now grounded due to lack of spare parts and maintenance issues. The airline needs $150 million to get them airworthy and deploy them into service. Though the airline managed to induct more capacity on international routes following the grounding of Jet Airways, its domestic market share has now dropped to 12%. At a time when all other private airlines from India are increasing their international operations, capacity-constrained AI, with an 18% market share in that segment, may be soon be marginalised like in the domestic market as it will not be able to expand, unlike others.

“It is quite possible that banks will go by the book in case AI defaults on interest payment. If the financial crisis is not dealt with on a war-footing, then AI will crash-land soon,” said Vaibhav Bhure, a lawyer from Bombay High Court who also practices in the NCLT.

“Banks have all the right available to them to proceed against AI, including action under Securitisation Act, but the government won’t let that happen. The only way is either it would infuse more equity or try to work out a disinvestment plan for AI,” said Mr. Bhure.

Write your Comments on this Article
Your Name
Native Place / Place of Residence
Your E-mail
Your Comment   You have characters left.
Security Validation
Enter the characters in the image above
    
Disclaimer: Please write your correct name and email address. Kindly do not post any personal, abusive, defamatory, infringing, obscene, indecent, discriminatory or unlawful or similar comments. Kemmannu.com will not be responsible for any defamatory message posted under this article.
Please note that under 66A of the IT Act, sending offensive or menacing messages through electronic communication service and sending false messages to cheat, mislead or deceive people or to cause annoyance to them is punishable. It is obligatory on kemmannu.com to provide the IP address and other details of senders of such comments, to the authority concerned upon request. Hence, sending offensive comments using kemmannu.com will be purely at your own risk, and in no way will Kemmannu.com be held responsible.
Similarly, Kemmannu.com reserves the right to edit / block / delete the messages without notice any content received from readers.




Udupi: Traffic congestion and dangers to pedestria
View More

Land for Sale at Neelavara, Udupi District.Land for Sale at Neelavara, Udupi District.
KEMMANNU CHURCH - Weekly Announcements.KEMMANNU CHURCH - Weekly Announcements.
Veez Konkani Illustrated Weekly e-Magazine # 115Veez Konkani Illustrated Weekly e-Magazine # 115
Milagres English Medium, School, KallianpurMilagres English Medium, School, Kallianpur
Open Air Dance and Music Festival at Aryan Resorts, near Kemmannu on 7th March.Open Air Dance and Music Festival at Aryan Resorts, near Kemmannu on 7th March.
Choice Furniture vast household showroom opens at Santhekatte, KallianpurChoice Furniture vast household showroom opens at Santhekatte, Kallianpur
Rozaricho Gaanz December IssueRozaricho Gaanz December Issue
Milarchi Laram - Issue Jan 2020Milarchi Laram - Issue Jan 2020
Focus Studio, Near Hotel Kidiyoor, UdupiFocus Studio, Near Hotel Kidiyoor, Udupi
Canara Beach Restaurant, Hoode/Bengre, Udupi.Canara Beach Restaurant, Hoode/Bengre, Udupi.
Delite Catering, SanthekatteDelite Catering, Santhekatte
Welcome to Thonse Naturecure HospitalWelcome to Thonse Naturecure Hospital
Kemmannu Platinum Jubilee Souvenir – Amruth KaanikKemmannu Platinum Jubilee Souvenir – Amruth Kaanik
St. Alphonsa of India