Air India is flying through a real bad weather. In other words, it is presently going through a rough financial phase. It has been hit by high cost of jet fuel and the airline is expected to report a loss of over Rs. 4000 crore in the current financial year. The working capital requirement which was Rs.6,500 crore has now shot up to over Rs.10,000 crore. Actually, this requirement should have been met from revenues, but all airlines, including AI, are now struggling to meet rising costs along with falling revenues. Even though there are more planes and flights, yet AI is not getting domestic passengers while private players with even smaller fleet are able to use their fleet more in terms of revenue generation.

Air India is seeking for a mix of debt and equity. Its paid up capital is nearly Rs.150 crore while the authorized capital is Rs. 1,500 crore. Air India wants the paid up figure to be closer to the authorized one which will require a combination of nearly Rs.1300 crore as equity. Also, it requires a hefty loan component. But this additional fund can be achieved of Air India promises that in future there will be an improvement in the performance along with cost cutting strategy.

Air India cannot immediately reduce the employee strength and fuel cost. However, it expects to save nearly Rs.650 crore by cutting down on a mix of unprofitable domestic and international flights. Air India being a national carrier and having a prestige attached to the airline, it will have to make a strong case for additional debt-equity for the carrier. The request for the requirement of funds and in what form (debt,equity or grant), will be cleared by the finance ministry, depending upon how well the air line is able to make a presentation of its plan containing solid measures and improved performance for the near future.

What next?