Home Economy Air India to seek Rs.25 bn from government: MD

Air India to seek Rs.25 bn from government: MD

By Arvind Padmanabhan, IANS,

Chicago : Air India will soon approach the government for funds worth Rs.25 billion (Rs.2,500 crore/$500 million) to finance its integration with Indian Airlines and other expansion plans, a top official has said.

“We have a very small equity base of Rs.145 crore (Rs.1.45 billion) but our aircraft acquisition plan alone is worth Rs.45,000 crore (Rs.450 billion,” said Raghu Menon, chairman and managing director of Air India.

“So we need the funds to beef up our equity base and to integrate the passenger services system of Air India and Indian Airlines,” Menon told IANS. “We will go to the civil aviation ministry very soon with a proposal.”

Air India had ordered 68 Boeing aircraft in 2006, while Indian Airlines had ordered 43 Airbus planes. Last year, the government created a new holding arm, National Aviation Company of India Ltd, to merge the two carriers.

According to the chief executive, here for a meeting among the chief executives of Star Alliance, a pact among 21 global and three regional carriers which Air India will join soon, the funds will be sought in a mix of debt and equity.

While Rs.1,500 crore (Rs.15 billion) will be sought as equity, the remaining Rs.1,000 crore will be requested in the form of debt, he said, adding that the earlier proposal for an public offer had been shot down for the moment.

The Air India chief also said that the complete integration of the two carriers was expected to conclude by end-2009.

“We hope to sign a contract with EDS Aviation by the end of this month for the passenger services system,” Menon said, referring to the US-based company that has provided technical and software solutions to several carriers.

“So by the end of calendar 2009 or latest by the first quarter of 2010, you can expect Air India and Indian Airlines to both operate under one code – and that is AI,” he said. At present, Indian Airlines operates under the IC code, while Air India has AI.

“What we have already started is to have a uniform livery for the two carriers, especially on new aircraft and for those that go for ‘C’ checks.”

Speaking about the general downturn in the aviation sector, the Air India chief said the passenger traffic – domestic and international – had dropped by 12-15 percent for his carrier.

He hoped for some relief if the sales tax regime for jet fuel was rationalised across the country, as it alone accounted for 35-45 percent of the operational cost.

For this, the government will need parliament’s approval to place aviation fuel under what is called a declared good. Once a declared good, the fuel will invite a uniform sales tax of for percent, against 35 percent charged by some states.