Air India seeks letter of comfort from MoF
05 October 2011
Mumbai/New Delhi: The ministry of civil aviation has asked the ministry of finance (MoF) to issue a letter of comfort on behalf of badly struggling, state-owned carrier Air India to a consortium of banks who have lent huge sums of money to the flag carrier. The letter of comfort is not a sovereign guarantee from the government but signifies support.
Thirteen banks, including SBI, Punjab National Bank, HDFC, Central Bank and Bank of Baroda, have lent Air India Rs22,000 crore by way of working capital, which have been used to meet day-to-day operational expenses and salaries.
Lately Air India has begun defaulting on debt repayments forcing banks to consider classifying loans to the carrier as non -performing-assets or NPAs.
According to Naseem Zaidi, civil aviation secretary, the carrier expects a letter of comfort on working capital loans to be part of the financial restructuring package being considered by the Group of Ministers, whioch is due to meet next week.
Reportedly, the finance ministry is also considering issuing a letter of comfort for its loans to UK bank, Standard Chartered, for a $280 million loan to Air India for purchase of spares and maintenance materials.
Air India has an annual spend of Rs1,000 crore on spares and maintenance.