Rs.6,500 crore equity to be infused into Air India
Union Minister for Civil Aviation Ajit Singh has ruled out bailing out crisis-ridden Kingfisher Airlines and asserted that the Directorate-General of Civil Aviation (DGCA) would not make any compromise on passenger safety.
Addressing a press conference after inaugurating India Aviation Show -2012 here on Wednesday, he said the DGCA, which was looking into the problems such as cancellation of flights and absenteeism by pilots, would submit its report in a day or two and the government would act based on the recommendations.
Stating that the government could not bail out Kingfisher or any other private airline, he said it did not want any airline to close down either. It was a free enterprise and with the aviation industry being capital-intensive, the airline would have to convince the banks about a viable financial business plan. “Government has nothing to do with that”.
Mr. Singh said the proposed financial restructuring package for Air India would be put before the Cabinet this week. The package seeks to infuse Rs.6,500 crore as capital in the next couple of weeks and conversion of portion of short-term into long-term loans.
He said the problems being faced by the aviation sector in the country were temporary and the prospects were bright in the long-term. Operating costs were going up and a big factor for this was the aviation fuel. While it accounted for 20-25 per cent of the operating costs the world over, it was 40 per cent or more in India. Part of the problem was high taxes imposed by the States.
In a bid to alleviate the problems faced by the sector, he said the government had decided to allow import of aviation turbine fuel (ATF) by the airlines directly. The proposal to allow FDI in aviation sector was with the Commerce Ministry. Another major step to help airlines was to allocate traffic rights on international routes to private Indian airlines. The move would alleviate financial stress because international operations were more profitable. As a result, the private airlines would add 500-600 flights on international routes this year.
Mr. Singh said the government would come out with a comprehensive civil aviation policy. Admitting that the delay in the delivery of 787 Dreamliner aircraft by Boeing had caused problems to Air India, he declined to comment on the compensation being sought from the airline and merely said that it was being negotiated.