The newly-appointed audit committee, headed by Mr Harsh Neotia, Chairman, Ambuja Realty, has asked Air India to look at ways of bringing down its annual interest burden and repayment costs on the acquisition of new aircraft. In 2006, the airline ordered 68 Boeing aircraft worth $7.5 billion while its 43 Airbus aircraft order is valued at about $2 billion.
“The committee has asked the management to tighten up in such a manner that both the interest burden and repayment can be brought down. Annually, the airline is paying about Rs 2,600 crore as interest and repayments. This figure will climb unless something is done,” official sources told Business Line. The audit committee includes senior officials from the Ministry of Civil Aviation.
The Government has provided a sovereign guarantee for $7 billion of the combined value of $10 billion for aircraft acquisition.
Technically, a Government guarantee should ensure that the airline is able to secure funds at better rates of interest. While this is true for a majority of the funds which have been secured by the airline at under 3 per cent, the airline has also tied up aircraft orders of $1 billion at an interest rate of about 12 per cent.
It was also indicated to the Committee that the airlines working capital requirement could balloon to Rs 19,000 crore this fiscal from the current level of Rs 17,000 crore.
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