Air India's Financial Restructuring Plan Approved by RBI, But With Conditions

Strategic Insights -

The Reserve Bank of India (RBI) has reportedly approved state-owned Air India Ltd's financial restructuring plan, which includes a debt recast of Rs. 20,000 crore and the sale and lease back of 14 Dreamliner aircraft. The plan aims to keep the aircraft off the airline's balance sheet and requires lenders to schedule a meeting for discussing the restructuring plan. However, the airline must adhere to conditions such as freezing performance-linked incentives for its employees, meeting cost-cutting and staff reduction targets, and turning cash-positive before tax.

Key Takeaways:

  • The RBI has approved Air India's financial restructuring plan with conditions, which includes a debt recast of Rs. 20,000 crore and the sale and lease back of 14 Dreamliner aircraft.
  • The plan aims to keep the aircraft off the airline's balance sheet, which is expected to reduce the airline's debt burden.
  • The airline must freeze performance-linked incentives for its 30,000 employees until it turns cash-positive before tax, and meet cost-cutting and staff reduction targets.
  • Air India has received a total of Rs. 3,200 crore in equity infusions over three years and has a short-term debt of Rs. 27,000 crore.
  • The airline has also borrowed Rs. 42,000 crore to buy aircraft, which has put a significant burden on the carrier.
  • The CAG has criticized Air India's decision to buy 111 Boeing and Airbus planes in 2005/06, stating it imposed an "undue long term financial burden on the carrier".
  • The airline has not posted a profit since merging with former state-owned partner Indian Airlines in 2007.

Statistics:

  • Rs. 20,000 crore: Debt recast proposed in Air India's financial restructuring plan
  • Rs. 27,000 crore: Short-term debt of Air India
  • Rs. 42,000 crore: Amount borrowed by Air India to buy aircraft
  • Rs. 3,200 crore: Total equity infusions received by Air India over three years
  • 14: Number of Dreamliner aircraft to be sold and leased back by Air India
  • 30,000: Number of Air India employees who will have their performance-linked incentives frozen
  • 111: Number of Boeing and Airbus planes purchased by Air India in 2005/06
  • 2005/06: Year in which Air India purchased the 111 Boeing and Airbus planes
  • 2007: Year in which Air India merged with former state-owned partner Indian Airlines
  • 2014: Year in which Air India plans to take delivery of the first 14 Dreamliner aircraft

Sources:

  • "Air India gets RBI nod for financial restructuring plan" by Dion Global Solutions Limited, distributed by Contify.com