India's loss-making national carrier Air India is staring at debt default if the government did not loosen its purse strings yet again as the airline needs about 9,000 crore this fiscal for debt servicing, reports say. The airline has run up a total debt of nearly Rs 55,000 while a government rescue plan including the creation of a special purpose vehicle (SPV) has not made much progress.
Now that the general election 2019 is underway, the finance ministry must be waiting for the next administration to decide on the future of the airline, the report says. The ministry of civil aviation and the airline management have already informed the government of the need for intervention to keep the airline afloat.
"Principal payments of a few loans are due this year but the airline does not have the money for repayment," the report in the Economic Times said. "Either Air India defaults or prunes its operations and thus costs to repay these loans. Representations have been made to the finance ministry on the issue."
Sources say the airline has been bearing an additional loss of about Rs 6 crore daily on international flights to Europe and the US because of the closing of Pakistani airspace following border tensions. The airline has cancelled some overseas flights to cut the losses.
After the intervention to bail out the ailing airline, the government had made clear that there would be no more fund infusions. "The government had taken over Air India's debt and made it clear that there would not be any more equity funding," an unidentified aviation ministry official told the newspaper. Some officials say the government will have to finally step in as it cannot afford to let the government airline fail like the private airlines. Naresh Goyal-founded Jet Airways is facing permanent closure if the lenders cannot find a suitable bidder to take up to 75 per cent stake in the ailing airline, which has grounded all its flights. Kingfisher Airlines that Vijay Mallya founded folded up in October 2012 after coming under a huge debt burden because of soaring fuel prices.
The government's attempt to sell a 76 per cent stake in the airline failed last year as nobody came forward. The government then formed the SPV, Air India Asset Holdings Ltd (AIAHL) and transferred about Rs 29,000 crore of working capital debt to it. Along with it, the government also took over about Rs 2,700 crore of the airline's annual interest payment liability out of a total of Rs 4,400 crore. But all the steps failed to drag the airline out of the woods.
Aviation circles are watching for the election result, which could spell clearly the direction in which the airline would go. If Prime Minister Narendra Modi-led Bharatiya Janata Party (BJP) government is back in power, that could mean the airline would be privatised, whatever it takes. A Congress-led government may continue to tinker with the financial burden of the airline until it collapses on its own if it fails to bring about a complete overhaul of the way it is run.