The government had provided Air India sovereign guarantees amounting to Rs 7,000 crore of which the airline has about Rs 2,500 crore left.

Air India wont have enough funds to pay employee salaries beyond October ET report
Money Crisis Wednesday, July 03, 2019 - 13:19
Written by  S. Mahadevan

Debt-ridden national carrier, Air India, is still to be out of the woods. The information emerging now is that it may not be in a position to make salary payments even to its employees, come October this year. Even otherwise, there have been delays in releasing employees’ salaries. The airline takes 10 days or more after the due date to pay the monthly emoluments to its staff. The average payout on account of salaries is around Rs 300 crore.

Besides salaries, there are debt repayments too that the airline has to meet and even here, the information is the company may not be able to make these payments after October.

Meanwhile the government is keen on liquidating its entire 100% stake in the carrier if there is a suitor. That suitor has been very difficult to find despite making several attempts. The NDA government, during the previous fiver-year term, had offered the airline a lifeline by providing a sovereign guarantee to the extent of Rs 7,000 crore. When last reported, the airline is in possession of Rs 2,500 crore out of that amount. This is what is being projected to last till October. Operating an airline means having to shell out huge funds on a daily basis on heads like fuel suppliers and catering companies and so on, besides the fixed monthly outgoes which include statutory dues like salaries.

Under the circumstances, attention may turn to the Union Budget for the remaining financial year 2019-20 to be presented to Parliament, this Friday, July 5. A senior Civil Aviation ministry official is being quoted to say that the ministry has not sought any additional support that what were already included in the interim budget presented by the stand-in Finance Minister Piyush Goyal before the general elections.

The SPV, Air India Asset Holdings Ltd, which has been floated to hold the assets and debts of Air India, was allocated Rs 3,900 crore in the interim budget. Of the Rs 58,000 crore that the airline owed as debts, Rs 29,464 crore have been transferred to this holding company.

There is the other question on what stand the government may take on the issue of payment of Rs 9,000 crore that the airline has to make this year as part of its debt repayments. With the government keen on a 100% disinvestment in the airline, it is highly unlikely that it may agree to foot that bill as well. There may be other ways available to the airline, like rolling over a part of the debt repayment to the next year.

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