The airline board reviews the financial restructuring plan
Passengers on Air India flights of less than 90 minutes duration may not be offered full meals.
The decision, if implemented, on such flights, will result in the cash-strapped national carrier saving Rs.20 crore annually, airline sources said.
At a meeting of the Air India board here on Tuesday, the troubled national carrier also decided to opt for sale and lease back mechanism for the yet-to-be delivered Boeing 787 Dreamliner aircraft. As part of its expansion plan, Air India had ordered 27 Dreamliners from American aircraft manufacturer Boeing.
The delivery of Dreamliner aircraft has already been delayed by almost two years and the first aircraft is likely to be delivered sometime in December. After Air India-Indian Airlines merger, the national carrier has slipped into deep financial crisis, raising question mark on its ability to handle the additional capacity and service the debts with which it has burdened itself. The Union Cabinet is likely to take a final call on the issue of reworking the B-787 order in view of the fragile financial health of Air India.
It is learnt that the voluntary retirement scheme (VRS) did not come up for discussion during the board meeting.
Airline management refused to comment on the VRS issue.
A statement issued after the board meeting said: “The board has approved the issue of request for proposal for 787 aircrafts under sale and lease back mechanism pending a final clearance from the Central Government.”
It was also decided to lease out excess capacity of two 747-400 aircraft as well as some Boeing 777-200 Long Range aircraft after the induction of B-787.
The board noted that passenger revenue did increase by Rs.1,294 crore but higher expenditure on fuel, wage and interest negated the impact on profitability.
Fuel bill saw an increase of 18 per cent to Rs.1,097 crore while the wage bill rose by Rs.295 crore. Due to increase in borrowing and hike in rates, the interest cost went up by Rs.860 crore. The company has to provide Rs.300 crore on account of depreciation.
The company is in the process of implementing the financial restructuring plan. It would provide a saving of Rs.1,000 crore annually by way of interest cost.
The board reviewed the progress on the implementation of the Turn Around Project (TAP) and the Financial Restructuring Plan (FRP).
Last week, the Reserve Bank of India approved extension of its loan tenures from 10 to 15 years, giving the much-needed relief to the cash-strapped national carrier.
The RBI approval would considerably ease the debt servicing burden of Air India. Under the Rs.18,000-crore corporate debt restructuring proposal, the lenders would extend the tenure of Rs.11,000 crore short-term loans into long-term loans of 15 years and convert Rs.7,000 crore debt into equity.
The beleaguered national carrier has accumulated debt of over Rs.64,000 crore from 14 lenders which, under the aegis of SBI Caps, had submitted a restructuring proposal to the RBI seeking its permission to extend the loan tenures, among other issues. Out of this, over Rs.22,000 crore are accumulated losses while Rs.40,000 crore amounted to loans taken for aircraft acquisition.
The troubled flag carrier is also awaiting a decision of the Union Cabinet on equity infusion of Rs.6,600 crore during the current financial year.