Air India struggles to pay wages

Air India,which was overlooked in interim Budget,finds itself in a precarious financial situation.

Written by Smita Aggarwal | New Delhi | Published: February 20, 2009 9:48 am

State carrier Air India,which was overlooked in Monday’s interim Budget,finds itself in a precarious financial situation,whereby it is becoming increasingly difficult for the airline to pay wages to its staff,fulfil lease commitments and aircraft loans.

In a recent meeting of civil aviation secretary N Madhavan Nambiar with Air India officials held in Mumbai to take stock of Air India’s current health,the beleaguered state carrier had pleaded for funds. Air India admitted that vendors were putting it (Air India) on credit hold. It has become “difficult to pay wages,(fulfil) lease commitments and aircraft loans,” the airline said.

In a presentation made to the secretary,Air India requested for a soft loan from government (Rs 2,750 crore) and an equity infusion (Rs 1,231 crore). The funds would help it “to strengthen the balance sheet and infuse confidence among institutional lenders to support the aircraft acquisition program,” it said. The proposal for equity infusion and soft loan has been awaiting the government’s nod.

Underlining the urgency of funds,the carrier said in the presentation that it was imperative to receive funds from government in February-March 2009,citing mounting losses,which show no signs of abating.

Air India is due to receive 30 aircraft next fiscal,for which it has already tied up funds to the tune of Rs 8,165.64 crore,partly from international banking consortiums. It is this expenditure which the Parliament cleared in the interim Budget on Monday. It has already received 15 aircrafts due for delivery this fiscal,payment for which is being made in a deferred manner.

The cash-strapped national carrier has been pitching for an equity infusion and a soft loan from the government,set aback by the global slowdown and an ambitious fleet acquisition plan. In the interim budget presented on Monday,hardly any relief came to the national carrier by way of government allocation of funds. The airlines posted losses to the tune of Rs 2,226 crore in 2007-08,which are likely to double this fiscal.

Even as an Air India official told The Indian Express that they didn’t expect anything in the budget as “it was hardly the forum where the government would have done anything,” it is disappointed at being overlooked.

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