Cabinet okays AI restructuring

NEW DELHI: After four years of deliberations, the much-delayed financial restructuring of Air India finally got the Cabinet approval on Thursday. Aviation Minister Ajit Singh said the airline

Published: 13th April 2012 02:08 AM  |   Last Updated: 16th May 2012 07:29 PM   |  A+A-

NEW DELHI: After four years of deliberations, the much-delayed financial restructuring of Air India finally got the Cabinet approval on Thursday. Aviation Minister Ajit Singh said the airline would be given Rs 30,000 crore till 2020, depending on the milestones that the carrier has to meet apart from announcing a plan to hive off its Maintenance, Repair and Overhaul (MRO) and ground handling into separate subsidiaries.

Singh informed that the approval of the turn-around plan would help the airline in getting an upfront equity support of Rs 6,750 crore, GOI guarantee for repayment of the principal amount and payment of interest on the non-convertible debentures of Rs 7,400 crore, equity for cash deficit support of Rs 4,552 crore till the 2021 fiscal, equity for already guaranteed aircraft loan of `18,929 crore till 2021 financial year and induction of already contracted for aircraft, including 27 B-787 and B777-300ER on a sale and lease back basis.  On the induction of the Boeing 787s, Singh indicated that the first aircraft was coming in two months.

MRO and Ground Handling Subsidiaries

Announcing the plan for hiving off MRO and ground handling services, Singh said almost 7,000 to 12,000 employees would be migrated to these new companies relieving Air India of its employee burden.

“Apart from saving Rs 1,000 crore in interests from the cash infusion, Air India will save Rs 250 crore in wage bills in the first year itself,” Singh said.

The MRO section of Air India Engineering Services Limited has the potential to tap the business in the Asia Pacific Region.

Right now, all airlines, including Air India, are going to Singapore, Dubai and Sri Lanka for their aircraft maintenance and these services could very well be provided within India.  “Capital expenditure to the extent of Rs 375 crore over a period of three years will be given for the MRO, while Rs 393 crore has been earmarked over 12 years for its ground handling,” he added.

Informing that the Dharmadikari Committee report would be implemented in two weeks, Singh indicated that the rationalisation of the pay scales across the board would not have any resistance from the employees of the new subsidiaries.

“An implementation committee will be formed to oversee that the suggestions for integration of the two entities of Air India and Indian Airlines take place in a systematic manner,” Singh said.

Restructuring of Air India is a debate that started in 2008 and some solution was offered on the Financial Restructuring Plan in 2009. Since then, the FRP has undergone many stages of discussion and postponement.

FDI from Foreign Carriers

The Civil Aviation Minister also indicated on Thursday that the proposal for FDI would be taken by the committee in its next meeting. Indicating that Air India would also be willing to take a foreign partner, Singh emphasised that the control would still be with the government.  

“At least 49 percent of FDI from foreign airlines will be taken up on a case to case basis and there will be several checks in place to protect the integrity of the country. All FDI will have to go through the SEBI norms and strictly adhere to the Aircraft Rules of 1937.”


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