AI accepts debt restructuring plan

Air India said on Wednesday it has accepted the corporate debt restructuring package first prepared by SBI Caps and then vetted by Deloitte.

"Air India has accepted the CDR package submitted by Deloitte," the airline's chairman and managing director, Arvind Jadhav, told reporters in Mumbai.

The package was approved after several confabulations with banks and the government, he said.

"We are going to meet the bank consortium and will soon announce the details," the Air India chief said.

In early-December, Air India had appointed global consultancy firm Deloitte to vet the SBI Caps-prepared financial restructuring plan.

The firm, after going through the proposal, has now submitted it to Air India.

While asking Deloitte to vet the SBI Caps report, Air India claimed the foreign agency was appointed mainly to vet the business plan as an independent aviation consultant before the restructuring plan was submitted to the Reserve Bank.

Air India is saddled with a debt of about Rs 40,000 crore (Rs 400 billion) of which Rs 18,000 crore (Rs 180 billion) is working capital loans taken from a consortium of banks while the balance Rs 22,000 crore (Rs 220 billion) worth of loans is towards payment of new aircraft ordered.

It has already raised loans worth around Rs 14,000 crore (Rs 140 billion) to fund the purchases and is currently in the process

of raising more money.

The working capital loan was mostly extended by state-run banks like SBI, PNB, IDBI Bank and Syndicate Bank.

Over the past four fiscals, Air India's losses have aggregated to Rs 14,000 crore (Rs 140 billion.

If the Reserve Bank agrees to the proposal, Air India will be able to reduce the interest rate on its working capital loans to 6-6.5 per cent from the present 12 per cent, thereby considerably reducing its debt servicing burden.

In 2007, the airline had placed massive orders for new aircraft worth Rs 44,000-crore (Rs 440 billion).

It had ordered 68 planes from American company Boeing and 43 from European aircraft company Airbus.

However, following the domino effect of the global financial crisis, the entire global airline industry suddenly found the going tough.

Meanwhile, asked about the strike call by a section of its pilots from today, Jadhav said that the DGCA is now looking into the matter.

The Delhi high court, in an order on Tuesday, restrained the pilots from going on strike. To a question whether the air-carrier had a contingency plan in the event of a strike, Jadhav said, "we always have a contingency plan."