Air India to go for direct fuel import to save costs

With the hardening of jet fuel prices, the board of Air India has decided to go for direct import of the fuel, which will save it  additional costs by way of state taxes.

The board further decided to avail $195 million by way of bridge loan towards meeting payment obligations for two of the 27 Dreamliner aircraft it had ordered earlier.

''The Air India Board, which met here today has decided to import aviation fuel directly. It has been decided to shortly appoint a service provider to source fuel supply as well as provide the necessary infrastructure for storage and distribution of fuel for in-plane fuelling,'' the company said in a statement yesterday.

The board has also approved hedging of jet fuel up to 20 per cent of its international intake and allotted a specific amount for this in its budget. According to the carrier, a risk management team of senior officials had been set up to monitor and take positions in fuel hedging.

Further, the board has approved a capital budget for the next fiscal, involving a capital outlay of over Rs400 crore on non-aircraft projects and also the revenue expenditure budget estimates for the next fiscal.

The board also took on record the progress on restructuring of the working capital into long term loans, which would allow Rs11,000 crore worth of working capital loan to be converted into long-term debt and Rs3,400 crore into cash credit facilities.

In January, the RBI had approved a Rs18,000-crore CDR proposal for the carrier, which included a sovereign guarantee for an issue of Rs7,400 crore worth non-convertible debentures.

The airline is expecting an equity infusion in the next fiscal, which would, apart from improving its operating as well as financial parameters, also give considerable comfort to the institutional lenders in the form of better net worth.