Air India to increase borrowing
Almasalla Travel News – Air India is looking for alternate funding, as a cash-strapped government of India has been unable to provide promised equity for the past six months. In a board meeting this week, the airline approved a plan to sell five Boeing 777-200LR aircraft to Etihad Airways. This is expected to bring in about $350 million, but the airline may need to borrow more for its working capital needs.
Last year the government signed off on a turnaround plan, which included $6.5 billion equity infusion phased over the next eight years. Air India has approached the Ministry of Finance for bank guarantees for the new loans. Government guarantees allow the airline to raise money at lower interest rates. Separately, it has also asked for sovereign guarantees to purchase three more Boeing 787s in the next few months.
Air India has been unable to use the 777LRs effectively. Officials unwilling to go on record say the aircraft have a high operating cost and the airline is not breaking even on routes where they are deployed. The Indian flag carrier has 20 777-200LRs and 777-300ERs. While the eight -200LRs are deployed on Newark, Seoul, Hong Kong, Tokyo and Osaka routes, the ERs are being used on US, Europe, China, Japan, Korea and Saudi Arabia routes. The airline’s senior management believes the fuel efficiency of the 787 will make the critical difference to operating costs.
Air India has plans to have 14 787s by December and had started international flights with the new aircraft from August. Dreamliners now operate from Delhi to Birmingham and Sydney-Melbourne and will be used to start direct services to Rome and Milan this month, and to Moscow from early next year. The airline is slowly re-opening routes it had shut down over the past decade.
The Indian government is fighting its own battles over balancing a budget deficit. Yet, it plans to privatize the airline, which has no backing.
Source : ATW
