Once the leader of the Indian skies and now reduced to the fourth position in terms of market share, Air India is carrying a loss of Rs 15,000 crore accumulated over the last four years. It is having a massive debt burden of Rs 40,000 crore (almost equally divided between working capital and long-term loan) and to service this, it annually pays around Rs 1,800 crore as interest. In the first six months of the current fiscal year, the firm has lost Rs 3,451 crore and it owes Rs 600 crore to the Airports Authority of India (AAI). The government-owned company is now asking for a one time fund infusion of Rs 17,500 crore.
No wonder the Civil Aviation Minister Vayalar Ravi, recently, told the Indian Parliament that Air India’s expenditure is Rs 57 crore a day against its earnings of Rs 36 crore a day, thus making a daily loss of Rs 21 crore. This does not just reflect the financial mess AI is in. It is a reflection of the strain brought upon the taxpayers’ money as it ends up every time seeking bail out from the government.
This, not to speak of the dues to the tune of Rs 2,280 crore that the airline has piled up as payment due to the PSU oil companies against supply of fuel. No wonder oil companies want AI to pay cash for fuel. The government has already infused Rs 2,000 crore in two years to bail out the airline, taking its capital base to Rs 2,145 crore and has earmarked another Rs 1,200 crore in the next financial year.
Though the Deloitte report has not been made public it is known that among other suggestions it has said the debt-laden carrier needs to expand aggressively by adding 113 aircraft to its fleet of 135 to 248 by 2015. It has also advised the carrier to focus more on domestic routes and to optimise utilisation hours of each of its flight to 14 hours a day, up at least 30% from its current utilisation levels. The Deloitte plan says a turnaround is possible if flight occupancy increases from 68% to at least 75-80% for low-fare division Air India Express and market share rises from 17.6 per cent in 2010 to 21 per cent. Deloitte also suggested AI cut its bill on aviation turbine fuel by Rs 300 crore annually, through aggressive negotiation with suppliers for domestic routes. It said that all these should be met by a comprehensive debt recast plan worked out by SBI Caps and substantial cash infusion from the government.