The Indian government finance ministry has refused Air India’s request to release Rs 105 crore as payment for the VVIP flights operated by the airline. Air India was hoping this money would allow it to repay the Rs 200 crore short-term long of 15 days it borrowed from a bank to pay salaries.
The ministry has asked aviation authorities to work out a long-term cash requirement for the airline based on a turnaround plan. A union leader, speaking to local media, has criticised the management of the flag carrier, saying that no amount of money or restructuring will help the airline without effective leadership.
Meanwhile, shares in Indian carrier Kingfisher Airlines have fallen 1.28% as investors worry about fuel costs and the problems the airline is having getting aircraft on lease due to a debt-ridden balance sheet. Kingfisher managed to cut its debt from Rs 7,651 crore to Rs 6,007 crore last year thanks to a debt recast plan that converted 30% of its debt into shares. However that share price is now under pressure as the airline continues to struggle to recover. In fiscal year 2011, the airline’s net loss was Rs 1,027 crore on a total income of Rs 6,496 crore. In fiscal year 2010, its net loss was Rs 1,647 crore on a total income of Rs 5,271. It has never made a profit since its inception.
Kingfisher needs to lease aircraft to bridge the gap until its aircraft deliveries are due to start at the end of 2012. However, reports suggest this has been difficult although the airline remains in discussions with several lessors.