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Announcing the decisions of the Cabinet Committee on Economic Affairs (CCEA), Civil Aviation Minister Ajit Singh told reporters that under the approved Turnaround Plan (TAP) and Financial Restructuring Plan (FRP), the airline would get an upfront equity infusion of Rs 6,750 crore. The airline has been allowed to issue government- guaranteed non-convertible debentures (NCDs) worth Rs 7,400 crore to its lenders, like financial institutions, banks, LIC and EPFO. These NCDs would be used to repay part of the airline`s close to Rs 21,200 crore working capital loans.
The debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore long-term loan on fleet acquisition, Rs 4,600 crore vendor dues besides an accumulated loss of Rs 20,320 crore. The CCEA also gave its nod to the induction of 27 Boeing 787 Dreamliners and three Boeing 777-300s on sale and leaseback basis. Under this system, one party sells a property to a buyer who immediately leases it back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset.
To questions about allowing foreign airlines to invest in Indian carriers including Air India, he said a decision is likely to be taken at the next meeting of the Cabinet. Singh said the FRP proposal that additional equity of Rs 30,231 crore be infused between 2012 and 2021 in the airline was also approved by the Cabinet. "But Air India will have to fulfil the tasks set out in the TAP and meet all the milestones" on a regular basis to get these benefits.
Asked if Air India would also be allowed to find a suitable foreign airline partner, the Minister said the decision to allow foreign airlines to pick up 49 per cent stake was for all Indian carriers. "Air India will have to find the right suitor... But the government will still own it," he said. On the FDI issue, Singh further said that investment by foreign carriers would not be through the automatic route and it would have to go through all checks and balances.
"Indian nationals will have substantial ownership and sufficient control. ... Two-thirds of the Directors will have to be Indian. Then there are security issues also," he said. Regarding Air India, he said the TAP and FRP would also give the airline cash deficit support of Rs 4,552 crore till 2021, as also equity for the already-guaranteed loan of Rs 18,929 crore till the same period for aircraft acquisition.
The Minister said the SBI-led consortium of banks have also approved conversion of short-term working capital loans of Rs 11,000 crore into long-term loans. "By 2020-21, Rs 30,000 crore will be infused. But there will be many check-points. If the airline meets the milestones, it will get the money," he said, adding that a Committee of Officers would be set up in a week to monitor whether the airline was meeting all the set parameters.
These include maintaining on-time performance of upto 90 per cent, passenger load factor of about 73 per cent and improving yields. To questions about the two subsidiaries which are to be floated, he said while the MRO subsidiary, to be called Air India Engineering Services Limited, would get equity of Rs 375 crore over the next three years, the one handling ground handling, named Air India Air Transport Services Limited, would get Rs 393 crore as equity over 12 years.
