Nacil may be asked to trim operations for viability

Following instructions from the finance ministry and the department of public enterprises...

Smita Aggarwal & Gunjan Pradhan Sinhanew Delhi | Published:March 26, 2009 12:46 am

Following instructions from the finance ministry and the department of public enterprises (DPE),the ministry of civil aviation will now draw out a plan to trim down Nacil’s operations in order to come out with a viable model for the next five years. National Aviation Company of India Limited (Nacil),which was established in 2007 with a net worth of Rs 8,000 crore,is likely to post losses of as much as Rs 4,465 crore this fiscal.

“We will do a scenario building exercise by trimming down on certain routes of the Air India,which are not the largest revenue earners,” a ministry official said. This could mean that Air India may try a combination of measures like cutting down on frequency on certain routes as well as dropping some of the routes altogether. Given that it is a scenario building exercise,it will take some time for Nacil to come up with plan that is viable in the medium term.

It is most likely that the lean routes will come under the axe. The recently introduced New Delhi-New York flight is in fact doing well with a load factor of 75-80 per cent,he added.

“Both the ministries are pushing hard for a viable model to be developed by the ministry of civil aviation before fund infusion is considered,” another senior government official told The Indian Express. A detailed model of their total inflows and outflows of funds has been demanded given that the company has only doubled its losses compared to last fiscal. “We fear that it may become sick as such huge losses have been recorded in less than three years of its setting up,” he further added.

The ministry of civil aviation had approached the Cabinet asking for a soft loan of Rs 3,000 crore at an interest rate of 5 per cent to finance infrastructure development for the new fleet that Nacil is in the process of acquiring. The company has Rs 44,000 crore fleet acquisition plan and has already taken Rs 20,000 crore from banks as loans. In addition,the company has asked for an equity infusion of Rs 1,200 crore from the government. “We have asked them for a taut plan as we do not want to pump in money every year,” the official said.

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