India’s central bank last week approved a move to extend the tenure of loans to the state-run airline by five years, with repayment now due after 15 years.
Air India’s bankers have “given the nod” to the restructuring programme, the company said after a meeting of the airline’s board.
“The company is in the process of implementing the financial restructuring plan, which would provide a saving of IRs 10 billion ($192 million) a year in interest costs,” the company said in a statement.
Air India also said that it plans to sell and lease out excess aircraft after taking delivery of new Boeing 787 Dreamliners into its fleet, with the aim of lowering debt that has ballooned to $9 billion. “Excess capacity” of two 747-400 aircraft would also be leased out as well as some 777-200 LR aircraft after it takes delivery of the Dreamliners, the company added.
Unlisted Air India made an estimated net loss of IRs 69.94 billion ($1.34 billion) in the fiscal year ended March 2011.
Ministerial approval of the central bank’s proposal is expected in the coming weeks, an Air India spokesman said on condition of anonymity.
“This would start the process for fresh capital infusion into the company,” he added.
The Indian government has pumped about IRs 12 billion ($230 million) into the airline in the financial year 2010-11 and expects another IRs 67 billion for the fiscal year ending March 2012, the spokesman said.
Air India has been in the red since 2007, when it merged with domestic carrier Indian Airlines and has seen its overall share of passenger traffic fall due to competition from private, domestic low-cost airlines.
Mounting debts have left it struggling to pay staff, as it awaits a further government cash injection and a turnaround plan. Air India, which is India’s fourth-largest airline by market share, has run into losses due to rising fuel and wage costs.
Most of India’s carriers, including leading private airlines Jet Airways and Kingfisher Airlines, have reported losses in the last quarter. In August, Air India’s invitation to join Star Alliance was suspended due to its failure to meet the minimum standards for the membership.
In October, talks between the airline and Star Alliance have resumed.
Air India said air traffic grew by nearly five per cent in the fiscal year ended March and revenues rose by $250 million in the same period.