RBI OKs Air India's debt restructuring plan/news09012012

The Reserve Bank of India ( RBI) has approved debt-ridden national carrier Air India's financial restructuring plan, which would enable banks to amortise their provisional losses over 29 quarters, a senior Air India official said.

'This should help banks to reduce the impact on their balance sheets, as well as assist the airline in its restructuring programme. If implemented as per the RBI recommendations, which have been approved by the Group of Ministers (GoM), Air India will turn Ebidta positive in 2013, cash positive in 2018 and will have net profit by 2020,' the official, who wished to be unnamed, said.

The flagship air-carrier is sitting on a mountain of debt running into Rs69,000 crore, out of which Rs42,000 crore was for fleet acquisition and the rest was working capital loans taken from 14 lenders led by State Bank.

The RBI could not be reached for comments. Under the financial restructuring plan, Rs11,000 crore out of the working capital loans of around Rs27,000 crore would be converted into long-term debt and Rs7,000 crore would be converted into cumulative redeemable preferential shares.

The turnaround plan is also based on successful induction of Boeing 787 Dreamliners into Air India's fleet. Simultaneously, Air India would also be leasing out its Boeing 777 long-range fleet, which has been found to be not viable, he said.

'Air India is also planning to improve its operating performance through a number of measures, which include increasing its load factor to 73%, improving its on-time punctuality to over 80%, as well as improving its aircraft utilisation to international standards, as well as improving its yield per revenue km by at least 5-10%,' the official said.

Meanwhile, Air India registered a steady improvement in its performance in December, with revenues growing by nearly 15% year-on-year, with corresponding increases in load factor and yield, the official said.
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