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Friday, 19 April, 2019, 10 : 30 AM [IST]

Air India stares at debts of INR 9,000 crore

Government bailout could be the sole chance of survival; aviation ministry escalates concern to FinMin.
As per Economic Times (ET), Air India is staring at debt repayments of INR 9,000 crore in the current fiscal year but sorely lacks the wherewithal to service them, said people with knowledge of the matter. While yet another government bailout could be its sole chance of survival, no decision is likely until the elections are over and the next administration takes over, they said. 

The Ministry of Civil Aviation and the airline have escalated the concern to the finance ministry, three government officials told ET. “Principal payments of a few loans are due this year but the airline does not have money to repay them,” said one of them. 

“Either Air India defaults or prunes its operations and thus costs to repay these loans. Representations have been made to the finance ministry on the issue.” Already in poor financial health, Air India has been losing about INR 6 crore daily on international flights to Europe and the US due to airspace closure by Pakistan in the wake of border tensions. The losses have forced the airline to cancel a few overseas flights. Election outcome another aviation ministry official said that the government had earlier ruled out any further fund infusions. “The government had taken over Air India’s debt and made it clear that there would not be any more equity funding,” said an aviation ministry official. “The finance ministry is aware of the issue and the government will have to help because it is a government airline.”

One of the officials said the carrier’s future may depend on the election outcome. If the ruling coalition is re-elected, there may be a push to divest fully “and debt servicing may not be the government’s focus”, he said without elaborating. 

Air India had a debt of more than INR 54,000 crore on its books when the government unsuccessfully tried to sell a 76% stake in it last year. Air India Asset Holdings Ltd (AIAHL). With this transfer, the government took over about INR 2,700 crore of the airline’s annual interest payment liability out of INR 4,400 crore that it had to pay every year. With this move, the airline was expected to improve its financial performance but the burden of repaying a certain portion of its debt and even the interest payment liability has led to worries about the national carrier’s financial sustainability.

(Source: ET)

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