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Beleaguered AI to get
Rs 30,000-cr boost New Delhi, April 12
The release of various tranches of equity will, however, be subject to achievement of various laid-down milestones, Civil Aviation Minister Ajit Singh said. For example, a couple of set targets for Air India include upscaling on-time performance from the current 71 per cent to 90 per cent, passenger load factor of about 73 per cent and improving yields. According to aviation expert Jitendra Bhargava, while on paper it may look like a perfect plan, but a lot depends upon how rigidly and seriously the government sticks to its commitment that the carrier had to attain certain “milestones” before becoming eligible for financial aid. “Unfortunately, when it comes to targets, past track record fails to establish the credence of the government,” he says. However, while Air India’s fortunes may take-off after the huge capital infusion, for private carriers — primarily Kingfisher Airlines that has been clamouring for FDI — the sun is yet to shine. The Vijay Mallya-promoted carrier will have to wait for some more time for the government to decide on the foreign investment issue in Indian carriers. Surprisingly, despite the blessings of the Commerce and Finance ministries as also the PMO, the issue of FDI in aviation sector, which is being fast-tracked by Singh himself, was not part of the Cabinet agenda today. Sources say the proposal is facing resistance, primarily from Kingfishers’ competitors who would prefer the cash-strapped carrier to go down rather than stay afloat.Key UPA ally NCP is also believed to be against the proposal and sources say the government would rather get all allies on board before pushing with a decision that may have political implications. At present, airlines are restricted from being part of foreign direct investment. Singh, however, promised that the issue would be placed before the Cabinet very soon, saying that the GoM on February 9 had allowed 49 per cent FDI in aviation. In fact, he also appeared open to FDI in Air India. When asked if the national carrier would also be allowed to find a foreign partner, the minister said the decision to allow foreign airlines to pick up 49 per cent stake was for all Indian carriers. “Air India will have to find the right suitor... But the government will still own it,” Singh said. However, investment by foreign carriers will not be through the automatic route and foreign partners will have to go through security checks and balances. “Indian nationals will have substantial ownership and sufficient control…two-thirds of the Directors will have to be Indian,” Singh said. Meanwhile, the government-owned carrier will get an additional equity of Rs 30,231 crore between 2012 and 2020. It will get 27 Boeing 787 Dreamliners and three Boeing 777-300s on sale and leaseback basis. According to the restructuring plan, 7,000 Air India employees will be shifted to the engineering section and 12,000 to the transport division. Asking employees to cooperate, the minister said Air India had to rationalise the cost, which had to be in line with industry norms, otherwise the government would not be able to use public money for the aviation company. The airline has been allowed to issue government-guaranteed non-convertible debentures (NCDs) worth Rs 7,400 crore to its lenders, like financial institutions, banks, LIC and EPFO. These NCDs will be used to repay part of the airline's close to Rs 21,200 crore working capital loans. The debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore long-term loan on fleet acquisition, Rs 4,600 crore vendor dues besides an accumulated loss of Rs 20,320 crore.
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Apart from approving the long-pending Turn Around Plan (TAP) and Financial Restructuring Plan (FRP) for the government-owned carrier, the Cabinet also decided to formally hive off Air India's MRO (Maintenance, Repair and Overhaul) business and Engineering Services as two wholly-owned subsidiaries to unburden the cash-strapped carrier of excess staff.