A tail parade of each of Air India's Boeing aircraft as in 2011. The 747-400, 777-300ER, 777-200LR and 737-800.
A tail parade of each of Air India's Boeing aircraft as in 2011. The 747-400, 777-300ER, 777-200LR and 737-800.

Air India to get Rs.6,500 crore bailout this year

National carrier Air India will receive a total of Rs.6,500 crore (about $1.08 billion) financial bail-out this year. The tax-payer funded bailout is part of a package exceeding Rs. 30,000 crore (about $6 billion at the time) approved in April 2012 and to be completed over nine years.

In his maiden budget budget yesterday, the finance minister Arun Jaitley proposed this bail-out as an infusion of additional equity in to the financial beleaguered carrier. Jaitley added Rs.1,000 crore on top of the Rs.5,500 crore infusion proposed in the interim budget of his predecessor P. Chidambaram, the finance minister of the previous UPA led government.

The bail-out became imperative as the airline missed financial performance targets which it agreed to as part of its turn-around plan, even as the airline reported a Rs. 48.75 crore EBITDA (earning before interest, taxes, depreciation and amortisation) positive performance.

READ ONLINE: Air India misses financial targets by 25%

The Indian government is also providing the airline additional indirect financial assistance in the form of long credit periods from government owned airports and oil marketing companies, mandated travel on the airline by government employees, sovereign guarantees to lower interest costs, allowing the airline to issue tax-free bonds to secure additional financing, and issuing of government backed non-convertible debentures worth Rs. 7,400 crore primarily to government controlled banks and financial institutions like the Life Insurance Corporation (LIC) of India, and the Employees’ Provident Fund Organisation of India (EPFO).

The airline is hoping to turn the corner with induction of newer aircraft like the fuel efficient Boeing 787-8 Dreamliner, but even here the airline is courting uninvited controversy with US carriers like Delta Air Lines complaining and suing the United States Export Import Bank for providing low cost financing to foreign carriers, such as Air India, for purchasing American airplanes.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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  1. Now I know where my tax money is going!

    • Sumeet Pal Sodhi

      Sir ,do u pay millions as tax ?you seem to be worried for your TAX money ,which by the way WAS yours .once u pay the tax it is GOI ‘s .
      ‘ Your ‘ tax money is distributed in thousands of govt schemes like free water ,free electricity ,rice @1 rupee/kg ,flyovers ,roads ,govt hospitals etc .Air India gets only a fraction of it .and u cry hoarse on seeing the smiles on the faces of rescued indian nurses and labour enslaved in iraq and kuwait !
      The soap u use ,thr cold drink u have, nearly 50% of your money goes abroad .think .and u cry for 1-2 rupees which Air India gets .shame .

      • Our tax money is used to fund the lives of inefficient, lazy, arrogant and corrupt people. This is nothing but a sophisticated way of BEGGING!

      • Please refrain from personal attacks. How much tax a person pays is his or her business.

        Personally, given the amount of waste in the Indian government spending, which includes Air India, I consider each Rupee I pay as tax, as excessive. 🙂

        BTW, just to put things in perspective, the Rs. 30,000 Crore bailout, is more than the entire central govt’s health dept. budget. And it works out to 1 Crore per employee.

        Sorry, but I cannot justify an airline over the health of a third world country.

        I am at Farnborough covering the air show, and let me tell you, India is off everyone’s radar screen. It is only we who live in India who still have this inflated opinion of the country. The world has written us off already.

      • BTW, please take time to read the AirAsia X story that will post tomorrow morning India time. The head of strategy of one of the world’s largest leasing companies told me, the Indian market is GROSSLY UNDER-SERVED by Indian carriers which has necessitated foreign carriers to be given slots, and the poor policy of the government trying to protect Air India (officially stated reason) is a major reason for the under-service.

        Just for your information, you need not defend the position. Just keep in mind, this person controls where BILLIONS not millions of dollars worth of aircraft investment is made.

        Impressions matter.

  2. Meanwhile, a one and a half year old Dreamliner (VT-ANI) has been parked for almost three months without a single flight. How much are they paying every month for financing this aircraft while it sits and rots, earning no revenue?

  3. Devesh, is there going to be any policy changes with the new government?!

  4. Devesh, is there going to be a change of policy towards AI with a new government in place?!

  5. Meanwhile VT-ANI, a 1 1/2 year old state of the art 787, hasn’t flown in three months. How much do they have to pay monthly for this plane while it generates no revenue? What is it about Air India that leads to all of these nearly brand new airplanes sitting around rotting on the tarmac?

    • Sumeet Pal Sodhi

      You should ask this question to Boeing .Air India is able to get these planes to the skies .all other airlines seem to have given up as they have switched to the more reliable Boeing 757 ,767 and 777 .

      • What are you talking about? There are twenty+ airlines flying 150 some Dreamliners world wide with 98% dispatch reliability. The only airline in the world that has one parked for three months is AI, who also happen to have a 4 year old 777 parked/scrapped as well. When you have a history of parking brand new planes and letting them rot, it’s pretty obvious you have no idea how to run an airline.

        • Sumeet Pal Sodhi

          No point argueing .

          • Sumeet, I must agree with Dazz. You need to check your facts. 787-8s are at 98% despatch reliability. Not the best. Only AI seems to be suffering problems. Is it thanks to dud aircraft? In which case why did AI accept the planes? Is it due to poor maintenance? In which case AI needs to look inwards and fix erring engineers. Boeing will not come to your rescue. Caveat Emptor my friend. Buyer Beware.

          • Sumeet Pal Sodhi

            Sir , windshield cracks , which are routine in 787’s is not a maintenance problem .likewise total oil loss in engines and frequent valve changes are not because of poor maintenance .
            And more problems ,which are not maintenance related are unique to this aircraft .
            Don’t blame AI for everything .
            Dud aircraft are here because of corrupt ministers .
            Corruption has to be dealt with a stern hand .Help AI reach its former glory instead of agreeing with people who say ‘shut it down ‘.I hope u understand ,sir .

  6. I hope Air India uses at least 0.001% for the upgrading online booking system. It is real shame that Govt. gives them lot of money and they ask the passengers to go to travel agents for booking. No integration of all code share flights till date. Not sure when the star alliance flights can be booked on the website. Lufthansa offers me Delhi-Hyd on Jet airways on its website while Lufthansa and Air India are star alliance members. I do not blame this on corrupt politicians.