Air India goes back for more
18 / 05 / 2012
TROUBLED Air India has gone back to the government, cap in hand, asking for more money.
This time the national carrier is asking for US$1bn tax-free bonds and fresh equity to pay for its fleet expansion, to lower interest rates on its $3.2bn debt and to help fund its ongoing, five-year, cost-cutting turnaround plan.
Air India lost $1.03bn last financial year and currently has an equity of only $30m.
Yet, it is still looking to increase its fleet by 111 aircraft from its current 152. The board has accepted that this may be unrealistic and so has cancelled an order for six 777s.
“Air India has sent the letter seeking cancellation of some Boeing aircraft. But cancelling the order is not an easy option as both parties have recourse to legal options,” an insider says.
“The airline may have to pay huge default charges if it decides to exercise the option. Both the parties will sit across the table and negotiate.”
Meanwhile, the airline has asked senior managers to consider voluntary retirement as a further way to cut costs, although the knowledge loss may do more harm than good.
Elsewhere in the company it has told its 31,000 of its staff that it will halve their productivity-linked incentive scheme, being unable to cut their salaries.