India has approved a $5.8 billion turnaround plan for financially struggling , as well as its order for 27 .
The turnaround plan (), which includes an equity infusion of 300 billion rupees ($5.8 billion) by 2020 to shore up finances and restructure operations of the state-run airline, was cleared at a meeting of the Cabinet Committee on Economic Affairs, Civil Aviation Minister Ajit Singh says. It will be implemented by a consortium of 19 banks lead by State Bank of India.
In addition to allowing Air India to raise up to 74 billion rupees by issuing bonds or non-convertible debentures guaranteed by the federal government, the rescue plan also includes converting 110 billion rupees of the national carrier’s short-term working capital loans into long-term debt and 34 billion rupees into cash credit facilities, Singh says.
The carrier will spin off two of its units, which will involve moving 7,000 employees to its maintenance, repair and overhaul business and 12,000 to transport services, he adds. “We seek the cooperation of Air India’s staff.”
Singh says restructuring of Air India was necessary, but the government will not use public money indefinitely.
“The government will not infinitely support Air India with taxpayers’ money if it does not perform as per the TAP. We will also monitor the performance of the airline ... There are set parameters that will [have to be] be seen, and only then tranches of equity will be released ... We cannot go on and on supporting Air India with taxpayers’ money.”
For monitoring purpose, a committee will be formed to ensure that the airline is performing as required by the restructuring plan, he says.
However, the minister expects that “the company will start making cash profits from 2018, but net profit will take more time.”
The federal cabinet also approved acceptance of all 27 Boeing 787 aircraft “as per schedule,” the civil aviation minister says, adding that the airline is expected to receive its first 787 “within the next two months.” For the first time, Air India will take new aircraft, such as the 787 and, on a sale-and-lease-back basis.
The government next week is likely to consider a proposal to let foreign airlines buy stakes in local carriers.