Government approves plan to save Air India

  • 12 April 2012
  • From the section India
Air India planes (file photo)
The national carrier has a huge debt burden and has been making losses in recent years

The Indian government has approved a debt restructuring plan to save Air India, the country's national airline.

Civil Aviation Minister Ajit Singh said 30bn rupees ($5.9bn; £3.7bn) would be injected into the airline by 2020.

But there will be many checks and targets that the company will need to achieve, the minister said.

Mr Singh said the restructuring was necessary as the government could not continue to spend public money on the loss-making airline.

Mr Singh told reporters after a meeting of the Cabinet Committee on Economic Affairs that around 7.4bn rupees of Air India's assets would be converted into non-convertible debentures.

The debt-ridden airline has outstanding loans and dues of 67.5bn rupees.

In February, three state-owned oil firms - Indian oil, Bharat Petroleum and Hindustan Petroleum - halted supplies to the airline for almost four hours for non-payment of dues.

Last year too, oil firms had put the airline on a cash-and-carry deal, which meant that Air India had to pay every time it refuelled its planes, rather than get a 90-day grace period usually given to make payments.

The firms restored the credit limit on assurances from the government that payments would be made on time.

The national carrier has seen its fortunes dwindle in recent years despite merging with Indian Airlines in 2007.

The firm has been making heavy losses and its debt burden has been increasingly raising concerns about the long-term viability and future of the airline.

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