Beleaguered national carrier Air India (AI), battling with a bleeding balance sheet and mounting debts, does not have the finances to pay for salaries of its employees beyond March.
The startling revelation has forced the country's aviation bosses to sit up and take notice of the clear and present danger. Senior airline executives briefed top civil aviation ministry officials about the company's deteriorating financial condition on Monday ahead of the crucial Group of Ministers meeting of AI on December 6.
Unless the government immediately releases the remaining Rs 1,200 crore equity support, which has been opposed by finance and home ministries, it would be very difficult for the airline to sustain operations, the Ministry has been told.
AI CMD Arvind Jadhav is on record as saying that the airline needs an infusion of
Rs 10,000 crore in equity and another Rs 10,000 crore in interest-free loan to regain financial health.
"AI is financially constrained. We are in a severe debt trap," Jadhav had told Hindustan Times.
"The interest outgo on working capital and other term loans is huge. We are borrowing to pay interest and we are borrowing at steep interest rates because AI's credit worthiness isn't all that rosy," Jadhav had said.
AI, which has a working capital debt of over Rs 18,000 crore, suffered a net loss of Rs 5,551 crore and an operating loss of Rs 3,472 crore in fiscal 2010. Despite this, it hired a chief operating officer for an annual pay package of Rs 3.1 crore apart from other big-ticket appointments.
A report by consultancy firm Booz & Co., circulated amongst AI board members, had said that the "slow and silent decline" of AI would lead beyond a point of no return.