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Despite its revenues taking off, Air India’s bottomline will remain grounded for another year. The national carrier expected to post losses in the region of Rs 3,900 crore for 2013-14, senior company executives estimate, despite a projected 18% jump in revenues to Rs 19,500 crore. With the Jet-Etihad alliance through and the Tata-SIA combine waiting in the wings, Air India will find it hard to fight back given its finances are in a shambles.
Air India officials said the airline’s turnover had risen 14% year-on-year between April and December. While the carrier will remain in the red, the loss will be smaller than the Rs 5,200 crore reported for 2012-13 and Rs 7,560 crore posted the year before. Air India awaits an equity infusion by the government of Rs 3,500 crore in the current year and officials say the funds should be in by March. Meanwhile, the carrier has borrowed Rs 2,000 crore against a guarantee from the government at an interest rate of 10.5-12%.
Air India’s turnaround plan — which envisages equity infusion by the government of Rs 30,000 crore over a nine-year period to 2021 — is held up with the airline having asked the government to reconsider the plan in the light of the sharp depreciation in the rupee to the current level of 62 against the dollar from R45 assumed earlier. Moreover, the sharp hike in crude price to $110 per barrel from $87 per barrel has meant higher fuel costs. Officials explained that while nearly 65-70% of the carrier’s expenditure was dollar- denominated around 40% of its collections were in foreign currencies. “The plan is being considered by the finance ministry,” executives told FE.
The over-leveraged carrier is in dire need of equity. Much of the airline’s financial problems can be traced to the high interest bill arising from the debt on its balance sheet of a whopping Rs 44,000 crore, half of which is aircraft-related. Of the balance, nearly Rs 18,000 crore represents long-term working capital loans. Moreover, the carrier has been unable to offer employees a voluntary retirement scheme, which would have cost it Rs 1,000 crore, and despite the manpower to aircraft ratio falling to 1:100, the salary bill for 2013-14 will be a fairly hefty Rs 3,200 crore.
“We have rationalised some routes, grounded some aircraft and returned some of the leased aircraft so the losses will come down this year,” a company executive explained.