AI plans debt restructuring, VRS

MUMBAI, FEB 5: National carrier, Air India AI has devised an elaborate strategy to avoid a debt trap by replacing the short-term working c...

MUMBAI, FEB 5: National carrier, Air India AI has devised an elaborate strategy to avoid a debt trap by replacing the short-term working capital loans with cheap long term loans. The airline is also toying with the idea of launching an attractive8217; VRS in the near future.

In an exclusive interview, recently appointed managing director, Michael Mascarenhas, said the airline is taking a number of steps to stop the financial haemorrhage in the airline.

quot;It is critically important for the survival of the airline to swap its high interest loans taken earlier with domestic loans. We think with a lower interest regime prevailing in the domestic sector, there is a scope to retire short terms debts with long term debts,quot; he said.

Mascarenhas assessment comes after an internal note has suggested that AI8217;s borrowings have ballooned to about Rs 1,100 crore till January 15, 1998. It has accumulated losses of over Rs 675 crore till the middle of the current fiscal. quot;For the first time in our history, the airlinehas to resort to take loans for working capital requirements8230; which means that our revenue is not able to take care of our expenditure,quot; he said.

quot;We have reached a position today where our total external debt structure including term loans and borrowings for working capital purposes are now in the region of something like 75 per cent in long term debt and 25 per cent on borrowings for working capital purposes.. we have to tackle this problem on an urgent basis,quot; he said.

The net worth of the company has eroded from Rs 1,384 crore as on March 31, 1994, to Rs 671 crore as on September 30, 1997, on an equity base of Rs 150 crore.

On the problem of over-staffing, Mascarenhas said: quot;We accept the airline is over-staffed. The aircraft to employee ratio is one of the highest in the world8230; we will have no option but to reduce people by offering a VRS in consultation with the unions.quot;

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quot;We will launch a scheme which could include free passage for a certain time, and medical cover. Many employees havealready come forward for VRS,quot; he said. With over 19,000 employees and a fleet of only 26 aircraft, the employee to aircraft ratio is one of the highest in the industry at 730.