Air India's Financial Restructuring Plan Approved

Strategic Insights -

Air India's board has approved a financial restructuring plan, which involves issuing preference shares worth Rs 7,500 crore to lenders as part of the plan. The airline expects to receive a one-time upfront equity infusion of Rs 6,600 crore, which will help clear outstanding vendor dues and alleviate operational pressures. This move comes as the airline struggles with a significant debt burden, including over Rs 44,000 crore in liabilities, primarily in working capital loans.

Key Takeaways:

  • The airline's board has approved the rearrangement of authorized share capital by issuing preference shares worth Rs 7,500 crore for allotment to lenders.
  • The aviation ministry plans to move a cabinet note for equity infusion into the airline and for approving the restructuring plan.
  • A one-time upfront equity infusion of Rs 6,600 crore will be sought to help clear Air India's current vendor dues, which are over Rs 18,000 crore.
  • The airline has outstanding liabilities of over Rs 44,000 crore, nearly half of which are working capital loans.
  • Air India's annual interest burden is over Rs 3,200 crore, which the airline struggles to meet due to operational pressures.
  • The government is providing a lifeline of equity infusion and loan restructuring to help the airline avoid a shutdown.
  • The finance ministry is concerned that banks may have to take a significant hit in the restructuring process.

Statistics:

  • Rs 7,500 crore: the value of preference shares to be issued to lenders as part of the financial restructuring plan.
  • Rs 6,600 crore: the one-time upfront equity infusion expected to help clear Air India's current vendor dues.
  • Rs 44,000 crore: the airline's outstanding liabilities, primarily in working capital loans.
  • Rs 3,200 crore: Air India's annual interest burden, which it struggles to meet.
  • Trinamool Congress Network (TNN): a news organization that reports on the story.

Sources:

  • "Air India's board okays financial restructuring plan". Times of India, November 30, 2011.