Air India board beefed up, strategic investor on cards
06 March 2010
New Delhi: The government has beefed up the board of badly struggling, state-owned carrier, Air India, with the induction of four independent directors with impressive records in their respective fields and is reportedly mulling inviting a strategic investor to bailout what has now become a white elephant.
As a merged entity, the carrier is now threatening to soak up badly needed funds, to the tune of a billion dollars every year atleast, for a lengthy period of time.
According to aviation ministry sources, an approach paper on the financial condition of the airline is currently being prepared for Cabinet consideration, which will list out various financial options that could be taken up to bail out the airline. They also said that such a paper would be submitted for cabinet consideration sometime this month.
Meanwhile, the government cleared four new names for induction on the board of the carrier as independent directors, including those of Anand Mahindra of Mahindra and Mahindra, air chief marshal (retd) Fali H Major, economist Amit Mitra and Ambuja realty group chairman, Harsh Neotia.
The merged entity, National Aviation Company of India Ltd (NACIL) is in dire financial straits with accumulated losses of over Rs7,000 crore, working capital loans of Rs16,000 crore and liable to pay out Rs55,000 crore for 111 aircraft, of which 74 have already been delivered.
It is estimated that the carrier now requires an annual infusion of Rs5,000 crore just to keep afloat as this sum would be needed to pay out annual wage and fuel bills as well as airport, maintenance and other service charges.
So far the government has approved equity infusion of Rs800 crore and made provisions of another Rs1,200 crore for the next fiscal.
The airline has so far refused to address endemic issues, such as bloated staffing, non-productive wage bills etc. It is yet to submit a coherent restructuring plan though it was expected to do so by the middle of the previous year. Its tentative attempts to address some of these issues have invited employee backlash and being a state-owned entity it has always sought the path of least resistance.