Government today acknowledged that equity infusion in Air India has neither been adequate nor timely and the cash-strapped airline would suffer additional interest burden as a consequence.
In the past three years, government has infused a total of Rs 12,200 crore into the national carrier but "there has been a shortfall in equity infusion to the tune of Rs 3,574 crore, leading to a liquidity crunch", Civil Aviation Minister Ajit Singh said.
"Equity infusion by the government has neither been timely, nor adequate. To meet its working capital requirements with the support of government guarantee, Air India has had to seek short-term working capital loans from the banks. This would result in additional interest burden to the company,"
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Singh told the Parliamentary Consultative Committee at a meeting in Panaji. However, the national carrier's overall performance has been "improving constantly" and it has been meeting most milestones laid out in its Turnaround Plan, he said.
Singh also informed the MPs that the combined estimated loss of the entire airline industry stood at Rs 9,771 crore. It had a combined debt burden of Rs 85,865 crore in the last financial year, according to an official release here.
Noting that there has been a "slowdown" in passenger throughput to 159.40 million in 2012-13 from 162.30 million in 2011-12 showing a negative growth of 1.8 per cent, Singh said traffic has picked up again in the second quarter of this year and it was estimated to double by 2019-20.
Referring to the high losses and debt burden of the airline industry, the minister said the major reasons were spiraling cost of jet fuel, economic slowdown, devaluation of rupee, low yields, high operational costs and the consequent widening gap between revenue and expenditure.
"The flawed perception that flying is the rich men's preserve has resulted in the civil aviation sector bearing the burden of high tax regime," he said. Singh said Air India has for the first time since its merger achieved a positive EBIDTA (earnings before interest, taxes, depreciation and amortization) and its revenue rose almost 10 per cent in 2012-13 compared to the previous year.
"The company has recorded appreciable cost saving through freezing of recruitment in non-essential areas, saving in interest cost due to working capital loans, reduction of booking agency commissions and grounding of ageing fleet.
"The operating loss and cash loss have also declined significantly in the last financial year due to restructuring of routes," Singh said, adding its network yield, passenger load factor, on-time performance and fleet utilisation has crossed the milestones set by the turnaround plan.
Observing that Air India's engineering and ground handling divisions have been hived off as independent profit making units, he said this would lead to a "significant improvement" in the aircraft to employee ratio of the airline which wouldcome down to 1:249 from 1:139.
Regarding operations of Boeing 787 Dreamliner, he said the cockpit and cabin crew of both the erstwhile airlines were now being trained and flying together to various destinations in India and abroad like London, Frankfurt, Paris, Hong Kong, Seoul, Sydney, Melbourne, Birmingham and Osaka.
With the induction of new aircraft, Air India's average fleet age had also come down from 14-15 years at the time of merger to almost five years, Singh said.
At the meeting, the Consultative Committee members raised several issues like promoting Pawan Hans connectivity in remote areas, delay in conversion of foreign pilots licences, reasons for Air India's losses and improvement in domestic and international connectivity.
