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Govt asks AI to make long-term plan for revamp

The airline has already floated the two companies which are ready to be operationalised.

News18test sharma |

Updated:June 29, 2011, 6:03 PM IST
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Govt asks AI to make long-term plan for revamp
The airline has already floated the two companies which are ready to be operationalised.

New Delhi: Government is understood to have asked Air India to prepare a 8 to 10-year-plan of resource generation to revamp itself by implementing the turnaround and financial restructuring programme to the hilt.

With a Group of Ministers (GoM) last week setting the ball rolling for effecting the turnaround, Air India expects another tranche of Rs 1,200 crore as equity in July and plans to operationalise two subsidiaries on MRO (maintenance, repair and overhaul) and ground-handling as soon as it gets the official nod, sources said.

It is also seeking total infusion of Rs 5,000 crore during this financial year itself, they said. The government has already infused Rs 2,000 crore in two tranches of equity, raising the airline's equity base to Rs 2,145 crore.

A plan would be prepared for the next decade or so as to how much equity infusion would be required by the airline to make it self-sustaining and how it would generate resources to emerge as a strong airline of the region, the sources said.

The airline Board, which met on Tuesday, took stock of the progress made in effecting the turnaround as was recommended by the GoM at its meeting a week ago.

A Cabinet note on operationalising Air India's proposed subsidiaries for ground handling and MRO has been finalised and forwarded to the Cabinet Secretary for circulation so that the issue of equity infusion can be taken up by the Cabinet Committee on Economic Affairs (CCEA) in the next few weeks, the sources said.

Once the two subsidiaries are operationalised, the airline would be able to transfer almost 19,000 of its 40,000 employees to them, they said.

The airline has already floated the two companies which are ready to be operationalised as soon as the government nod is received, the sources said.

The two companies are Air India Engineering Services Limited to carry out MRO operations and Air India Transport Services Limited for ground handling.

The sources claimed that both subsidiaries would be able to earn profits right from the first year itself.

Civil Aviation Minister Vayalar Ravi had said after the GoM meet that a proposal to release Rs 1,200 crore, which has been earmarked in the current udget, would be placed before the CCEA "within a short time-frame".

At this meeting on June 22 chaired by Finance Minister Pranab Mukherjee, it was also decided to set up a committee to examine the turnaround and financial restructuring plans and submit a report within six weeks to the GoM for a review. It would also examine the plan to restructure the massive debt of Rs 40,000 crore.

The bankers' consortium, approached by the airline for debt restructuring, had in April supported the turnaround plan with certain conditions. The airline had then set a target for enhancing revenues by Rs 5,000 crore and slash costs by Rs 4,000 crore per annum as part of this plan.

Air India is saddled with a debt of about Rs 40,000 crore, of which Rs 18,000 crore are working capital loans taken from a consortium of banks and the remaining amount of loans is towards payment of new aircraft ordered.

The government has also paid Rs 250 crore towards its dues to Air India for carrying out VVIP flights and evacuation of people from various countries in the recent past. It was also considering releasing another Rs 173 crore soon, the sources said.

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