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Govt's Yet Another Booster Dose For Air India

PTI 04 Aug 2011, 22:13:09 IST
PTI

New Delhi, Aug 4: Ailing Air India today got a fresh equity infusion of Rs 1200 crore in the third instance of financial assistance to the beleaguered national carrier from the government.

The decision was taken at a meeting of the Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh.

The airline, which is incurring Rs 600 crore monthly loss, has so far received Rs 2000 crore in the past two financial years.

As Air India is passing through critical financial crunch, the equity induction would not only ease the cash flow into the company but also preclude borrowings from markets at high costs, an official release said.

Air India's present paid-up equity capital is not sufficient for an aviation company of its size which is already struggling to address costly legacy assets, a weakening revenue stream and high cost structure resulting in rising liabilities.

The Group of Ministers had, at its meeting held in February 2010, recommended rationalisation or harmonisation of the wage costs and “legacy” union agreements. It had also supported the setting up of support businesses of MRO, ground handling and cargo.

Based on the approval of Cabinet Committee on Economic Affairs, government has so far approved Rs 2000 crore as equity investment in the Air India during the year 2009-10 and 2010-11. Besides, government has approved and released Rs 500 crore as equity investment in the carrier during the current financial year.

“There are several factors which are causing losses to Air India..abnormal increase in aviation fuel prices, competition from budget and other airlines...increase in wages and overheads...,” Civil Aviation Minister Vayalar Ravi told the Rajya Sabha today.

Besides, the government is paying interest on working capital and procurement of aircraft.

As a result, Air India is incurring Rs 600 crore loss every month as income is around Rs 1,100 crore and expenses at Rs 1,700 crore, the Minister said answering supplementaries.

Air India has taken a series of measures for reducing costs, which include rationalisation of certain loss-making routes, return of leased aircraft, phasing out of old fleet, reduction in contractual employment and outsourced agencies, fuel savings, optimisation of aircraft utilisation, closure of foreign stations and offline offices.

The state-run carrier has failed to pay salaries to its employees for the last two months.

Prime Minister Manmohan Singh had yesterday said in Lok Sabha that wages and appropriate perks would be paid to the cash-starved Air India employees at the earliest. PTI