Air India Will Shut Down In 6 Months If It’s Not Sold; Rs 60,000 Cr Debt Of Air India Is Now Unbearable

As per the senior airline official, the struggling Air India might be forced to shut down by June next year unless it finds a buyer as “piecemeal” arrangements cannot be sustained for long.

How Did This Happen?

According to reports, the Air India’s advance group bookings may have been impacted due to Civil Aviation Minister Hardeep Singh Puri’s statement in Parliament last month that “the airline will have to close down if it’s not privatized.”

Earlier to this, the Centre has announced that it was looking to divest Air India and its subsidiaries. 

For the past few fiscals, the national carrier has been facing an acute cash crunch. 

Air India’s losses zoomed to Rs 4,685 crore for April-November, as against a loss of Rs 1,658 crore recorded in FY2019.

Air India has a recorded debt of around Rs 60,000 crore, including total current liabilities of Rs 15,000 crore owed to vendors, lessors, employees and airport operators.

Why Would This Happen?

According to a senior official, Puri’s statement “was impactful on our revenues. The group bookings account for 4-5% of revenues of Air India, “but, we are correcting it,”.

While answering the question about how the airline was being managed with limited funds, he said “We will work till we can; if they (government) do not want to give us more funds, and if they ask us to shut shop, we will. We have no option.”

A total of 125 aircraft are present in the Air India fleet and its subsidiary Air India Express has 25, and Alliance Air 19. 

Out of the 169 aircraft in total, 20 aircraft of Air India were grounded earlier this year.

What Does Air India Official Say?

“We have recovered eight grounded widebody aircraft including two Boeing 777s and four B787-800s (Dreamliners). Twelve Airbus A320 family aircraft are still grounded. A few of these aircraft will be used on the Mumbai-Stansted route that is set to start in February 2020,” said the official.

They also added that Air India needed another $150 million to pay arrears, overhaul the aircraft, and to recover the aircraft.

They said “We had sought a Rs 2,400 -crore sovereign guarantee to mop up funds for meeting operational requirements. So far, the government has issued a Rs 500-crore guarantee.”

The official also informed that the government is unlikely to keep aside cash for the debt-strapped airline in its upcoming budget.

The said that the whole bidding process may take “at least six months” but the airline’s survival was in danger if the process went beyond six months.

While talking about the disinvestment plans, the senior official said that the government was planning to sell Air India and Air India Express together and Alliance Air separately.

Out of all three airlines, Air India Express is the only profitable airline at the moment.

What Could Be Expected In Future?

With the latest reports coming in, IndiGo and Abu Dhabi-based Etihad Airways have expressed interest in bidding for national carrier Air India. 

According to sources “Representatives from these companies have met government officials and, unofficially shown interest in the national carrier,”.

The expression of interest (EoI) document will likely be issued in January 2020, as per the report.

Also, the sale of Air India is expected to help the government move closer to its divestment target of Rs 1.05 lakh crore for FY.