Equity infusion, soft loan likely for Air India

July 23rd, 2008 - 9:11 pm ICT by IANS  

New Delhi, July 23 (IANS) The government may infuse equity and soft loans to support Air India’s ambitious expansion plans, and believes this would bail the carrier out of its financial mess, a senior aviation ministry official said Wednesday. “This will not be a bailout. Air India (AI) is working out how to rationalise routes. It will not fly on non-profitable routes and adopt other cost-cut measures to recoup losses,” the official said at an interaction with reporters.

By doing this, AI expects to save Rs.10 billion by the end of this fiscal, said the official, requesting anonymity.

Air India and the ministry of civil aviation are expected to formalise a cost-cutting plan by the middle of next month.

The official ruled out raising funds through the primary market, saying it was not a viable option in the current fluctuating market. “It’s not a time to be very optimistic about the market,” he said.

Air India has reported a loss of Rs.7 billion in 2006-07, and the government is apprehensive that the accumulated losses could even breach the Rs.10-billion mark this fiscal.

With the government winning the trust vote in parliament Tuesday, the civil aviation ministry is hopeful it would be able to complete all unfinished agenda before the parliamentary polls April-May next year.

“We cannot have more projects for the aviation sector any more. We are concentrating only on the unfinished projects. We do not have much time to take up new projects,” the official said.

“We will try to get the Airport Economic Regulatory Authority Bill (for setting-up of an aviation regulator) cleared in parliament,” said the official.

Projects like Navi Mumbai airport will be given priority, he said, adding that rationalisation of aviation fuel costs and other contentious issues would be addressed over the next few months.

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