Air India to demand another Rs 2,000 crore to repay debts | india | Hindustan Times
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Air India to demand another Rs 2,000 crore to repay debts

india Updated: Oct 10, 2010 13:13 IST

As the process to infuse Rs 1,200 crore as additional equity in Air India takes shape, the national carrier might ask for another Rs 2,000 crore from the government in the next financial year to repay its massive debt, official sources said today.

The airline would require Rs 3,000-Rs 4,000 crore annually to pay off its debt, which is primarily on account of aircraft induction, according to an official estimation.

The monthly interest burden on this count averages at Rs 200 crore, while the debt each month stands at about Rs 300 crore, the sources said.

In this backdrop, the airline may ask for another tranche of Rs 2,000 crore as equity some time in the next financial year, the sources said.

While the government infused Rs 800 crore in the last fiscal, a note for consideration to the Cabinet Committee on Economic Affairs (CCEA) is being prepared by Civil Aviation Ministry for an additional infusion of Rs 1,200 crore.

The second tranche of government funds, to be released after CCEA approval, is also likely to be used for settling outstanding dues and not to enhance the airline's equity base.

CCEA is likely to take up the proposal next month.

The airline would also seek cabinet approval to operationalise its six Strategic Business Units (SBUs) when the government considers equity infusion.

The SBUs relating to low cost airline, cargo, Maintenance, Repair and Overhaul (MRO), grounding handling, engineering and related business would be operationalised as separate profit centres to enhance revenues.

The management also plans to seek government's concurrence to review all agreements with its 14 unions and start re-negotiations with them.

At present, there are 10 wage agreements signed between these unions and the management.

Two unions were de-recognised following a flash strike three days after the May 22 plane crash in Mangalore.

The unions maintain that the airline's wage bill was 18 per cent of the total turnover, as against a global average of about 22 per cent of total turnover for most international carriers.

According to official estimates, Air India is expected to incur a loss of Rs 5,656.62 crore in 2009-10. The airline had suffered a loss of Rs 2,226.16 crore in 2007-08 which rose to Rs 5,548.26 crore the following year.