Air India has demanded an up front equity infusion of Rs. 6,600 crore (Rs. 66 billion), including the Rs. 1,200 crore (Rs. 12 billion) announced in this year's budget, during this financial year.The infusion is one of the preconditions set by its bankers to execute the turnaround plan.
The struggling state-owned carrier made the demand before a finance ministry sub-committee headed by special secretary (expenditure) Vilasini Ramachandran.
The committee was formed by finance minister Pranab Mukherjee to look into the debt restructuring plan offer and how much money the government would have to inject as equity.
"AI made a demand for an up front equity infusion of Rs. 6,600 crore and a support of Rs. 1,772 crore in the form of guarantee on short-term loans for this financial year," said a government official on condition of anonymity.
The carrier will use the money to clear dues of oil marketing companies, which had stopped supplies to it, leading to cancellation of flights.
Following the intervention of the civil aviation ministry, the oil companies agreed to give AI a three-month moratorium.
AI has not been able to pay to the Airports Authority of India and private airport operators. It has been struggling to pay salaries to its staff on time.
Apart from the infusion, the banks have also sought a commitment from the airline's management that its revenue will grow by at least 14 per cent a year for the next 10
years.
They also want cost-cutting measures and spinning off of businesses, as envisaged in a report prepared by Deloitte.
In return, the lenders have agreed to convert the Rs. 21,200-crore (Rs. 212 billion) working capital loan into long-term debt. Of this, Rs. 11,000 crore (Rs. 110 billion) will be converted into long-term debt, to be paid over 10 years, while the remaining will be converted into compulsorily redeemable preference shares.
The government has till now injected Rs. 2,000-crore (Rs. 20 billion) fresh equity into the airline. The airline got Rs. 800 crore (Rs. 8 billion) in 2009-10 and Rs. 1,200 crore (Rs. 12 billion) in 2010-11 from the government.
The proposed infusion of Rs. 1,200 crore (Rs. 12 billion) this financial year will take its equity base to Rs. 3,345 crore (Rs. 33.45 billion).
AI has a debt of over Rs. 40,000 crore (Rs. 400 billion), with over Rs. 22,000-crore (Rs. 220 billion) short-term loans to fund working capital requirements.
It has accumulated losses of Rs. 20,000 crore (Rs. 200 billion). It lost Rs. 2,226 crore (Rs. 22.26 billion) in 2007-08, Rs. 7,189 crore (Rs. 71.89 billion) in 2008-09 and Rs. 5,551 crore (Rs. 55.51 billion) in 2009-10 and around Rs. 6,000 crore (Rs. 60 billion) in 2010-11.
