Sunday, July 26, 2009

Air India asks for more money: Government demands better performance

Air India would need Rs.20,000 crore to recover from the worst financial losses in its history. The current amount is five times higher compared to the carrier’s October 2008 proposal of Rs. 1231crore and a soft loan of 2750 crore with 5% interest payable over 15 years.

On July 25, 2009, Air India and SBI Capital Markets Limited made a presentation on the restructuring plan of Air India to the Committee of Secretaries (CoS) which suggested an infusion of Rs. 10,000 crore from the government and collecting funds through bond issue or soft loan. The plan also included various cost cutting and revenue increasing measures, revival plan and revenue projection for Air India.

The Civil Aviation, on the contrary, believes that the carrier would not require more than Rs.3,000 crore. The CoS asked the finance ministry to further determine the extent of assistance necessary to revive the carrier. Demanding a further concrete plan for the next one and half year, the CoS said that the financial assistance asked by the carrier should be matched by serious cost reduction and “better revenue management.” The next CoS meeting would be held in August where the financial restructuring of Air India will be reviewed further.

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Economic Times

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