Mumbai: Air India has current outstanding long-term debt of about $5 billion and is considering several steps including selling non-core assets to improve its balance sheet, said a senior executive at the loss-making carrier.
Of the total debt, the airline has to repay about Rs18 billion this year and the same amount the year after, S Venkat, Air India`s executive director of finance, told The Wall Street Journal.
A possible option Air India is looking at to ease the debt burden "is restructuring and refinancing of rupee denominated loans," Venkat said.
Air India has been incurring losses since 2007, mainly because of the global economic downturn and federal government policies that forced the airline to operate on unprofitable domestic routes, as well as offering liberal air traffic rights to foreign carriers, which increased competition for the state-run airline.
A merger with erstwhile Indian Airlines in 2007 and the burden of a USD 15 billion order for 111 aircraft placed with Boeing and Airbus in 2005 also added to Air India`s woes.
Air India, operated by the National Aviation Company of India Ltd., is estimated to have lost Rs 54 billion in the fiscal year ended March 31.
Venkat said the Indian government injected Rs 8 billion as equity in Air India in the past year to improve the company`s finances and it is expected to inject another Rs 12 billion this fiscal year.
"Further equity infusion will depend on the success of the cost-cutting and revenue enhancement measures undertaken by NACIL," Venkat said.
As part of its debt restructuring plans, Air India issued a tender in May to refinance debt worth Rs 50 billion that it took in 2009 to buy 21 Airbus planes.
Venkat said the airline is taking steps to cut its employee costs by freezing recruitment in "non-operational areas." It will also rework performance benchmarks of employees and directly link the payment of perks to those benchmarks, he said.
The carrier has received deliveries of 81 new planes of the total 111 ordered and is currently able to fill 74% of its domestic and 69% of its international flights, he said.
Venkat added that Air India has taken several steps recently to trim its losses, including reducing or returning leased planes, grounding old planes, introducing new planes, cutting contract worker numbers and moving to improve fuel-efficiency.