Sign in Subscribe
Banks (Finance)

Air India Seeks Working Capital Loans to Mitigate Financial Strains

Strategic Insights

— 1 min read

Air India is engaged in negotiations with state-run banks to secure working capital loans at low interest rates. The airline aims to borrow between Rs 1,500-2,000 crore to facilitate its day-to-day operations, as it already has a significant working capital debt of over Rs 16,000 crore and expects losses of around Rs 7,200 crore for the year. In a bid to cut costs, the airline has been in talks with banks to convert its high-cost debt into low-cost loans. Air India has also taken measures to reduce its expenses, including the release of productivity-linked incentives (PLI) and flying allowances for its staff, and a proposal to cut PLI and flying allowances for senior management by up to 50%.

Key Takeaways:

  • Air India is negotiating with public sector banks, including the Syndicate Bank, to secure working capital loans of Rs 1,500-2,000 crore.
  • The airline has a significant working capital debt of over Rs 16,000 crore and expects losses of around Rs 7,200 crore for the year.
  • Air India has already released productivity-linked incentives (PLI) and flying allowances for its 31,000 employees, including pilots, for July.
  • The airline management proposed a 50% cut in PLI and flying allowances for senior management, including executive pilots and engineers, to save around Rs 750 crore annually.
  • The proposal was put on hold after unions opposed it, and the management agreed to pay the PLI dues by October 7, bringing an end to a five-day pilot agitation that resulted in a loss of over Rs 100 crore to the airline.

Statistics:

  • Air India has a working capital debt of over Rs 16,000 crore.
  • The airline expects losses of around Rs 7,200 crore for the year.
  • Air India has 31,000 employees, including pilots.
  • The proposed 50% cut in PLI and flying allowances for senior management could save around Rs 750 crore annually.
  • The airline's total wage bill is over Rs 3,100 crore.
  • The pilot agitation resulted in a loss of over Rs 100 crore to the airline.

Sources:

  • Air India sources
  • Civil Aviation Minister Praful Patel
  • Euclid Infotech Pvt. Ltd. (Copyright holder)

Read more