Flying on empty: Air India’s losses triple to highest ever, daily deficit over Rs 8 crore

The two airlines have together borrowed Rs 8,550 crore so far as working capital or funds needed to keep them going, according to a financial status document finalised at the end of April and obtained by this newspaper.

This almost exhausts the existing limits for working capital borrowings approved by the board and sanctioned by the banks, the document says. The amount is also more than the total estimated value of the immovable properties of the two airlines which is between Rs 8,000 crore and Rs 8,500 crore.

According to estimates made in the middle of April, the airlines jointly face a daily working capital deficit of Rs 8.2 crore and insiders say this could well have crossed Rs 10 crore today due to the spike in global oil prices since.

Load factors have plunged so steeply — one of the reasons for the losses — that many times there are more crew than passengers on international flights of Air India. For instance, a recent Mumbai/Delhi-London flight had 13 crew and 12 passengers.

During the first six months of the last financial year (April-Sept 2007), 74 of the 146 Indian services suffered cash losses while 21 of 28 Air India services suffered the same fate.

The financial status was presented at the end of April to the new NACIL Chairman and MD Raghu Menon, weeks after he took over. The presentation also contained explanations for the company’s troubles and a wish list of measures that need to be put in place to prevent it from going belly up and breathe fresh life into it.

Unfortunately for NACIL, Menon himself took ill subsequently and the company has been flying on auto pilot for almost a month now before he is expected to resume duty on Monday.

“The situation is rather grim,” said a top NACIL official, who spoke on condition of anonymity. “The day banks stop giving us loans we will have to close down. Fuel prices are being blamed for our losses but that is just a mask. Even depreciation for new planes bought is only around Rs 700 crore or Rs 800 crore. There are any number of other reasons that are responsible.”

NACIL finds itself in dire straits at a time the entire aviation industry, both global and domestic, is struggling to cope with runaway fuel prices. Within India, it has also meant heightened competition, excess capacity, rock bottom fares on the one hand and falling passenger loads and soaring operating costs for the state-run airlines on the other.

The Indian aviation sector posted losses of $938 million or close to Rs 4,000 crore during 2007/08 and aviation analysts estimate that the figure could more than double this year if oil prices continue to climb like they have been.

A NACIL spokesman said, “At this juncture, all airlines are reeling under heavy losses due to uncontrolled rise in fuel prices and Air India is working to minimise its losses.”

The absence of Chairman Menon was also not a factor in this process as senior directors had been delegated tasks to cut costs, he added. When contacted, Civil Aviation Secretary Ashok Chawla told The Sunday Express that the government was monitoring NACIL’s dipping fortunes closely and was putting in place measures to stem them.

(Tomorrow: The Blame Game, What went wrong, when and where)