Air India, Airlines, Aviation Business, News

Air India revival: Govt mulls plan to reduce airline’s Rs 55,000 crore debt by half

Off 8

The government is planning to transfer Rs 29,000 crore of Air India’s total debt of Rs 55,000 crore to a Special Purpose Vehicle (SPV). The move will help the airline reduce its interest outgo to a great extent, a top Aviation Ministry official in the know of the development told. Once implemented, the revival plan would reduce the airline’s overall loans by half to Rs 26,000 crore. A majority of this accounts for the carrier’s aircraft loans.

Also, the airline’s annual loan interest liability payout of Rs 4,400 crore would be drastically reduced by Rs 2,700 crore to just Rs 1,700 crore, which will help it in paring the debt.

While talking to reporters on Thursday, Aviation Secretary RN Chaubey confirmed the development, saying the government was mulling whether the funds should be transferred to SPV from Air India or it should be used to raise further loans.

The funds will be transferred to Air India Asset Holding Limited, which will be headed by the Air India Chairman. The other six board members of AAHL will comprise Air India’s director, finance director and secretaries from the Aviation Ministry, among others.

Besides, a plan is being implemented that will result in annual financial benefits worth Rs 2,000 crore by way of cost cutting and revenue enhancement measures, a senior official told on Wednesday.

Civil Aviation Minister Suresh Prabhu also said Air India is facing a legacy problem. “What is Air India’s problems and we are addressing it by strategy… we will request the Finance Ministry to give us some more money (for Air India),” he said in response to a query on how the airline can improve amenities to passengers.

The government also decided to sell some of the Maharajah’s real estate along with the strategic sale of the airline’s ground handling subsidiary Air India Air Transport Services Limited (AIATSL) on Wednesday.

A ministerial panel headed by Finance Minister Arun Jaitley gave the green light to sell 27 acres of Air India’s land in the capital’s upmarket Vasant Vihar to public sector company NBCC. This land will be used to build high-end luxury apartments. The panel reportedly also took an in-principle decision to take up the sale of a large plot on Baba Kharak Singh Marg, in Central Delhi, which can be taken up for commercial use.

As per government estimates, the sale of AIATSL and some of the other subsidiaries, along with the monetisation of Air India’s land assets, could help the debt-ridden carrier raise over Rs 10,000 crore, which will be used to repay lenders.

About the author / 

Aviation News India