• Air India’s aircraft sit idle because it can’t pay for spares and repair

    Despite many attractions such as lucrative international routes and prime time slots, Air India has yet to find a suitor after the civil aviation ministry came out with the preliminary information memorandum on Air India’s strategic disinvestment on March 28. Air India’s mountain of debt, besides many other issues, discourages buyers. The debt stands at Rs 48,876 crore.

    India’s national airline is also being bled by a cash deficit. The civil aviation ministry has admitted that several of its aircraft are idling because Air India is unable to purchase all the spares it needs thanks to a monthly cash deficit of Rs 200-250 crore that affects the availability of funds for maintenance, according to a TOI report.

    The ministry has told Parliament’s Public Accounts Committee (PAC) that a restricted cash flow was responsible for inoperational aircraft despite a turnaround plan (TAP) being in force since 2011 while fleet expansion had been hit by viability issues and an ongoing CBI probe into previous acquisitions.

    On March 28, the ministry came out with the preliminary information memorandum on Air India’s strategic sale. It has sought expressions of interest from potential bidders for a 76-percent stake sale in loss-making Air India as well as divestment of Air India Express and AI-SATS. The last date for submission of expression of Interest is May 14. The qualified bidder will be informed on May 28. A number of airlines have refused to come forward due to discouraging terms of sale.

    “There is a cash deficit of Rs 200 crore to Rs 250 crore every month which affects the availability of funds for procurement of spares,” the ministry told the PAC even as it said that “every attempt” was being made to devote maximum financial resources to the availability of spares to improve utilization of aircraft. It needed $300 million accessed through external commercial borrowings to liquidate outstanding dues of foreign suppliers in 2015 to improve the situation as maintenance expenditure soaked up Rs 2,500 crore or 12% of the debt-laden airline’s operating expenditure.

    The ministry told the PAC that aircraft engines earlier sent abroad for overhaul and repair were being maintained domestically. “AI is also in constant dialogue with its suppliers to remove the credit hold in order to maintain a smooth supply of spares for sustained and uninterrupted operations,” it said. The ministry also stated that aircraft acquired on lease were grounded for around two months at the time of redelivery as a number of conditions had to be satisfied.

    With a total debt totaling Rs 48,876 crore (government-guaranteed Rs 25,388 crore and non-GOI guaranteed Rs 23,488 crore) AI’s cash situation remains perilous despite improvements in operating profits.

    AI’s debt remains high as a key assumption or objective of the TAP — accumulation of Rs 5,000 crore by way of monetization of properties — has not happened. As against Rs 500 crore being monetized every year, AI has managed only Rs 725 crore till date and reason is “defective title deeds” and a bar by the ministry of urban development on a sale of property given the airline on “perpetual lease”.

    Though AI’s turnover has been increasing, and the TAP and financial reconstruction plan have helped improve on-time performance, load factor, aircraft utilization, hiving off non-core assets and gaining equity support, cash losses remain high despite a declining trend. Also, plans to offer a VRS (voluntary retirement scheme) to employees was dropped as it was found to be financially unviable.  Cam Atkinson Womens Jersey

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