Another plan to reduce Air India's debt and keep the national carrier flying is taking shape but there are also concerns if another round of cash burn will make a turnaround possible.
The creation of a Special purpose Vehicle (SPV) for reducing the national carrier's debt had cropped up many times in the past but now it looks like a certainty.
As much as Rs 29,000 crore of the airline's working capital debt will be transferred to the SPV, thereby halving the debt burden of the company, the Economic Times reported on Monday, citing three officials.
The carrier has received almost an equal amount in the last six years under a rescue package offered by the previous government. Sceptics would ask if the latest measure will actually save the carrier and plug the holes through which money drains.
The bigger question is whether funnelling more money into the carrier will actually help it turn around. Is debt reduction alone a panacea for the ills of the airline? Higher fuel bills, bloated operational costs, rising staff costs and tightening competition all will make the ride choppier for the airline.
As per the latest reports, the SPV will be known as Air India Assets Holding (AIAHL) and will be headed by Air India's chairman.
The report also said that the government is also planning an equity infusion, the decision on which will be taken during the parliament's winter session.
"An equity infusion into Air India by the government is also being discussed ... An approval for equity infusion from the parliament will be taken during the winter session," one of the sources told the daily.
Air India is saddled with a debt of Rs 55,000 crore. The AIAHL, which will take over more than half of it, will meet the repayment and interest obligations by selling the airline's assets and subsidiaries.
When this plan materialises, Air India will be left with a debt of Rs 26,000 crore.
The debt-laden national carrier has been kept afloat with the help of a bailout package given by the UPA regime in 2012. Earlier this year, the Narendra Modi government's attempt to make a strategic disinvestment had failed to materialise.
In September, oil marketing companies served an ultimatum to the carrier over the non-payment of dues. It was reported that Air India owed oil companies around Rs 5,000 crore in dues.