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Air India

In: Computers and Technology

Submitted By Rolling
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The Penniless Maharaja

Replacing the top executive at Air India will not abate the airline’s financial woes

08 May 2009 | Not Profitable: Many believe Air India does not need all the planes it has ordered
(Pic by: Satheesh Nair) |
Even as Air India goes through a messy change in leadership, the airline’s financial position is becoming untenable — the financial losses for the year ending March 2009 are estimated at Rs 4,200 crore, according to top airline sources.

The airline’s working capital limit is Rs 15,000 crore, of which Rs 14,600 crore has been exhausted and it will be seeking an increase in the limit from banks. The firm already has Rs 15,000 crore of long-term loans for its 21-odd new planes, which have arrived, that it needs to service. This will go up to Rs 25,000 crore soon as it securing another $2 billion loan to acquire more aircraft.

However, there seems to be no way to repay even the existing debts, as there are no surpluses. The airline is running a monthly deficit of Rs 300 crore and a recent statement of the airline said the cash deficit in the first six months of fiscal 2009 will be Rs 1,380 crore. The statement, however, seems hastily prepared as it assumes a monthly collection of Rs 1,300 crore, which is impossible in the airline industry — seasonality ensures that revenues vary widely from month to month. “Air India is a time bomb awaiting the next government that comes into power,” says a top civil aviation ministry source.

The government has removed Raghu Menon as chairman and managing director of Air India — he joined the airline in April 2008 for a three-year term. The removal has been ugly. According to sources, Union Civil Aviation Minister Praful Patel has not been happy with his performance, though the final trigger appears to be some trivial appointment of a regional head in...

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