The government on Thursday approved a restructuring plan for cash-strapped national carrier Air India that entails a mega rescue package of Rs 30,000 crore spread over the next 10 years through a combination of cash support and government guarantees.
The union cabinet,which cleared the AI package today,deferred a decision on permitting foreign carriers to pick up 49 per cent stake in domestic airlines to next week,senior government officials said.
Under the rescue plan for AI,nearly 19,000 employees are to be transferred to two separate airline subsidiaries that would be set up over the next couple of months.
The union cabinet today approved the turnaround plan (TAP) and financial restructuring plan for Air India. Under the TAP,Air India will hive off two subsidiaries ground handling and aircraft maintenance that will absorb more than half of its workforce, Civil Aviation Minister Ajit Singh said after the meeting.
The bailout has been linked to milestones such as on-time-performance,passenger load factor,turnaround time and pruning of the annual wage bill. AIs progress on these fronts will be monitored by a committee that will be set up soon. Singh said the carrier may turn profitable in another 10-15 years.
Of the total rescue package of Rs 30,000 crore,Rs 18,929 crore has been earmarked for fleet acquisition,while Rs 4,552 crore would go towards bridging the carriers working capital requirements. An amount of Rs 7,400 crore will be extended in the form of government guarantees for repayment of principal and interest on non-convertible debentures to be issued to banks and financial institutions in order to repay part of AIs working capital loans.
The minister said banks had approved the conversion of short-term working capital loans of Rs 11,000 crore into long-term loans.
As part of its fleet acquisition plans,AI will induct 27 Boeing 787 Dreamliners and three B 777-300 aircraft for which it had placed orders in 2005 on a sale and leaseback basis.
Air India CMD Rohit Nandan told The Indian Express,My first priority would be to clear the salaries and other dues of the staff. He said the nearly three-month backlog would be cleared after May 22,when AI is likely to receive the funds after Parliament meets to pass the finance Bill. AI will receive Rs 6,750 crore as upfront equity infusion in 2012-13,of which it has already received Rs 1,200 crore in the last fiscal,and Rs 4,000 crore has been accounted for in this years budget.
The minister conceded that the government expected industrial disruptions on implementation of the Justice Dharmadhikari Committee report on wage rationalisation in the next few weeks.
We foresee a lot of problems (over employees unrest). However,Air India has no option but to rationalise its costs and be in line with industry standards, he said. In the first year after the reports implementation,the total wage bill is expected to come down by at least Rs 250 crore. Over the next few years,these savings will increase, Singh added.