Air India may not be able to sustain operations, CMD Lohani tells Centre

Air India Chairman Ashwani Lohani has warned of flight disruptions and possible invocation of government guarantee because of delays in fundraising and refinance of aircraft debt. Air India is facing a cash squeeze due to lack of fund infusion and monthly shortfall of Rs 220 crore in operations.


It has led to the airline defaulting on statutory payments and caused delays in payment to vendors and service providers as well.


Air India is seeking government approval to raise a Rs 2,000-crore loan and refinance $819-million aircraft debt, which would help tide over the financial crisis. “The overall financial situation of the airline is grossly untenable and it may not be able to sustain physical operations in the absence of immediate government intervention and support,” Lohani wrote to the civil aviation ministry last week while seeking nod for refinance of loan and fresh loan guarantees.


Air India received an offer from a consortium of four banks to refinance the $819 million bridge loan taken for acquiring six Boeing 787 and one Boeing 777 aircraft.


The government guarantee in respect to the bridge loan will expire on December 27 and the airline has sought government nod to refinance it before end of the month. “In case the current bridge financing loans of $819 million are not paid off, the lenders may call on the central guarantee in the next one week as they have to take action 15 days prior to the expiry of the guarantee,” Lohani said in his letter.


A civil aviation ministry official said Air India’s proposals for loan guarantee and loan refinancing have been forwarded to the finance ministry for approval. Air India made a loss of Rs 8,556 crore in the last financial year. The airline continues to bleed in the current fiscal despite increase in revenue and yields. New domestic and international flights, too, have been launched but delay in fund infusion has also resulted in continued grounding of 12 Airbus planes.


Last Saturday, Lohani also took to the social media to highlight difficulties in running the airline and make a fresh plea for funds.


In a Facebook post, Lohani had said the airline needs to survive before it is sold.

The government is looking to sell 100 per cent stake in Air India and is expected to issue expressions of interest next month.

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