Air India Close To Defaulting Days After Jet Airways Collapse

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Just days after the suspension of all operations for Jet Airways, fellow Indian airline Air India is in trouble too. The carrier is short by around INR 90 billion ($1.3 billion) to make repayments on debt due in the current fiscal year.

Air India operates a fleet of 125 aircraft. Photo: Wikimedia

What’s happening?

Air India is currently in need of funds to pay off loans and to cover the rest of their aircraft purchase loans. The airline has recently appealed to the government for another bailout. However, with elections ongoing in India, it’s unlikely any decision will be reached until a new government takes power.

Air India is faced with the prospect of either defaulting on loans or pruning back its operations to recoup some cash. There is also the slim possibility that they could file for bankruptcy. Representations have been made to the finance ministry on the issue.

Air India’s total debt stands at INR 540 billion ($7.8 billion). The government recently offloaded more than half of this amount of INR 290 billion ($4.2 billion), to a newly formed special purpose vehicle, Air India Asset Holdings Ltd (AIAHL) to reduce its annual debt servicing. The new company is now trying to sell non-core subsidiaries of the airline to repay some of the debt. The annual servicing of the debt now offloaded to AIAHL cost Air India INR 27 billion ($390 million).

Fellow Indian carrier Jet Airways recently suspended all operations with a total debt of just INR 85 billion ($1.2 billion) as they were unable to maintain operations. In comparison to Air India, their total debt of was just a quarter of the size of the Maharaja’s. Unfortunately for Air India, the current government has said it does not intend to provide any further financing directly to Air India.

Jet Airways completely suspended operations just 3 days ago. Photo: Wikimedia

Future plans for Air India

Future plans for Air India involves adding capacity on existing routes which were operated by Jet Airways and their 777-300ER. The chairman of Air India, Ashwani Lohani, wrote a letter to the State Bank of India, exploring the possibility of operating five of Jet Airways grounded Boeing 777-300ER aircraft on the following out of service Jet Airways routes:

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  • Mumbai – London
  • Mumbai – Dubai
  • Delhi – London
  • Delhi – Dubai
  • Delhi – Singapore
Air India Express operates a fleet of 25 Boeing 737-800s. Photo: Wikimedia

With Air India Express currently facing a shortage in capacity, the carrier has been asked to consider taking on Jet’s grounded 737-800s.

The above routes suffered a huge loss when Jet Airways stopped flying internationally. To put it in perspective, when Jet Airways stopped flights to London that meant a loss of 9,688 weekly seats each way.

Technically, Air India doesn’t need Jet Airways planes as they have 24 aircraft grounded of their own at the moment including several 777/787 aircraft. However, the airline simply does not have the required funds to complete scheduled maintenance on these aircraft to make them operational.

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