Air India will default on payments without govt help in fundraising: Lohani

Air India. Photo: Shutterstock
Air India needs to survive till it is sold, the airline’s Chairman Ashwani Lohani wrote in a Facebook post on Saturday, in a fresh plea to government for funds.

Lohani’s comment comes days after he highlighted the airline’s grim financial health in a letter to the civil aviation ministry. Over the past few months, Air India is seeking government guarantee to raise a Rs 2,000-crore loan. So far, the government has not acted on the request. The airline would default on payment obligations if capital is not raised, Lohani is said to have written in the letter.

Air India is losing Rs 150-200 crore each month despite 10 per cent year-on-year increase in revenue. Liquidity situation remains extremely tight and salary for the month of November was disbursed on December 11. 

Civil Aviation Minister Hardeep Singh Puri’s recent remark that the government would shut down the airline if fails to find a buyer has also made travel agents and vendors jittery.

“Air India needs to survive till it is sold. I wonder why is it so difficult for this appreciation to sink in and also that in this environment of disinvestment, expecting a radical improvement bordering on a turnaround is an impractical thought. That output can be given sans input is a grossly impractical thought,” Lohani said in his post.

Lohani’s comment is also seen as a response to criticism from retired airline executives on his inability to turnaround the airline.

Lohani did not offer further comments. The civil aviation ministry, too, did not immediately react on the issue.

A senior finance ministry official said that according to rules of strategic disinvestment, the government doesn't infuse cash in organisations that have been identified to be sold. “There were multiple targets to be achieved as part of the turnaround plan. Air India has hardly satisfied any criteria. Staff and salary restructuring hasn't been done. Route rationalisation didn't happen despite instructions from the civil aviation ministry. The government’s resources are finite,” the official said.

Over the past nine years, the government has pumped in over Rs 30,000 crore as equity in the airline. But fresh fund infusion has been ruled out now, as the government is looking at 100 per cent stake sale. An expression of interest is expected to be issued next month.

Last September, the government approved a financial package comprising of Rs 3,975 crore of cash support and loan guarantees of Rs 7,600 crore to make Air India a “strong, competitive and a self sustaining airline”. Air India’s request to guarantee loans of Rs 2,000 crore is a part of last September's revival plans.

However, the airline’s regional executive director, Ravi Bodade, on Sunday said they have performed better than last year on most parameters. “Our revenue, yields and number of passenger flown have increased,” he said.

Yet the airline continues to face significant cash crunch. Air India’s forward bookings have been impacted and vendors are stepping up the pressure to clear dues in view of the uncertainty of the airline’s future. “Travel agents burnt their fingers with the closure of Jet Airways. They are more vigilant now. There is concern about issues like cancellations and refunds whenever an airline shuts down. We, however, hope the government will not let Air India fail,” said Jyoti Mayal, president of Travel Agents Association of India.

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