Cabinet Committee on Economic Affairs (CCEA)04-August, 2011 20:10 IST
| Equity infusion in Air India Ltd. |
 As Air India is passing through critical financial crunch, the equity induction would not only ease the cash flow situation of the Company but would also preclude borrowings from the markets at high costs. Air India's present paid up equity capital is not sufficient for an aviation company of its size. The company is currently struggling to address costly legacy assets, a weakening revenue stream and high cost structure resulting in rising liabilities. The Group of Ministers in its meeting held on 3rd February 2010 decided that following recommendations should be placed before the Cabinet along with a credible plan for revival of the Airline:- (a) Rationalisation or Harmonisation of the wage costs and legacy union agreements. This may lead to severe IT issues and Governments support to the management would be essential; (b) Setting up of support businesses of MRO, Ground Handling and Cargo; Thereafter, as desired by the GOM, both Ministry of Civil Aviation and the management of Air India have undertaken extensive evaluation of the situation at Air India from a long-term perspective, to arrive at certain definite options for Air India's future viability. The Government of India and the Ministry of Civil Aviation (MoCA) have been monitoring Air India since June 2008 and since June, 2009 there have been extensive interactions between MoCA and Air India in working towards a solution for the future viability of Air India. Several rounds of presentations have been made during this period by Air India management to the COS, the GoM and Cabinet has also been apprised on the developments at Air India. Based on the approval of Cabinet Committee on Economic Affairs, Government has so far approved Rs.2000 crore as equity investment in the Air India during the year 2009-10 and 2010-11. Besides, Government has also approved and released a sum of Rs.500 crore as equity investment in Air India during the current financial year. Further, considering the precarious liquidity position of Air India, Prime Minister's Office constituted a Group of Ministers to oversee the affairs of Air India. The Group of Ministers had a series of meetings and desired that a viable and credible Turn Around Plan (TAP) be evolved by the airline. Air India has prepared a TAP and Financial Restructuring Plan (FRP) in consultation with the financial consultant M/s. SBI Caps which is under consideration of the Government. The turnaround plan envisages swift and coordinated action to expand market share in a rapidly growing industry thereby ensuring a return to profitability. |
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