The National Aviation Company of India Ltd, the company that operates national carrier, Air India, will take a blueprint to the civil aviation ministry this week on how it plans to utilise a Rs14,000-crore bailout package that it is seeking.
On Saturday, the civil aviation ministry held initial discussions in this regard with the NACIL, created through the Air India-Indian Airlines merger in 2007. The meeting will be the last NACIL is likely to have with the ministry before the union budget is announced next month.
However, various unconfirmed reports suggest that NACIL, faced with losses that are mounting by the day, is unlikely to get the amount that it is demanding, and may have to settle for around Rs5,000 crore, while aviation minister Praful Patel's plan to make a public offering for the airline is not likely to take off soon.
Indian Express quotes an unnamed 'very senior source' in the ministry as saying, ''An equity infusion of up to Rs1,500 crore, plus a soft loan of Rs3,000-3,500 crore will be considered on a priority basis. There is no chance of the airline receiving a package of Rs14,000-crore package.''
The meeting next week will also look at the issues, such as the setting up a national passengers' advisory board to address passengers' needs, ways to optimise capacity and preparing a viable business model for the next five years.
''We have submitted a proposal to the ministry recently asking for a bailout package,'' said a NACIL spokesperson without divulging the size of the package. He further confirmed that Air India is setting up a national passengers' advisory board.
The fully government-owned NACIL, covering the combined operations of Air India and Indian Airlines, has nearly doubled its losses to Rs4,000 crore in financial 2008-09. The company has borrowed close to Rs15,000 crore, with a large chunk being utilised for the purchase of aircraft, according to the Centre for Asia Pacific Aviation.
Civil aviation minister Praful Patel last week said that government would look at the partial divestment of Air India, with an initial public offering (IPO) being an option. However, this is unlikely with the current shape of the company's balance sheet.
Though auditors are still vetting Nacil's 2008-09 accounts, its losses for the fiscal were in the range of Rs 5,000 crore, instead of the expected Rs 3,000 crore, it is reported. Alarmed, NACIL has asked the civil aviation ministry for a package comprising Rs5,000 crore of equity infusion, Rs2,000 crore of grant and a soft loan of Rs7,000 crore-just to stay afloat.
The Rs 5,000-crore loss is almost five times the combined losses of the two national carriers before their merger. Apart from the economic slowdown that has hit the aviation industry, NACIL's failure to integrate the two state-owned carriers, having around 33,000 people on its rolls, has compounded its problems. Surprisingly, the company employs 20,000 more on contract.
The carrier has used up the enhanced Rs 16,000-crore working capital loan facility recently raised by the board.