Why Air India is plagued by mounting losses

Saying the liberal bilateral regime during recent years with other countries for air flights is a major reason for its huge losses, Air India has asked the government to withdraw some of these.

The government-owned carrier has asked for withdrawal of flights from destinations such as Hyderabad, Ahmedabad, Bangalore, Lucknow, Chennai and Jaipur, among others.

It also has asked the government to stop flights to 18 tourist destinations that include places like Amritsar, Bhubaneshwar, Thiruvananthapuram and Varanasi, among others.

"The capacity entitlements under various bilaterals increased during January 2004 till March 2010 by around 290 per cent and the utilisation of these bilateral rights has been much less in the case of Indian carriers.

But the foreign carriers have utilised these rights, impacting the revenue share of Indian carriers," said a government official, who did not want to be identified.

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The liberal exchange of traffic rights was started in 2005, when Praful Patel was civil aviation minister, leading to lot of foreign carriers coming to India.

"Due to liberal bilaterals, the national carrier lost exclusive rights to operate from many interior points in the country," the official added.

The official also said the first right of refusal to start flights to any international destinations by Air India was only followed on paper.

"Even as they were not allowed on sectors AI wanted to operate, they were allowed parallel sectors, hence, damaging AI's revenue.

Also, the delay in the delivery of the Boeing 787 took its toll because AI has not been able to complete its route restructuring. This benefited the private carriers," said the official.

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AI has accumulated losses of Rs 20,000 crore (Rs 200 billion) and debt of Rs 46,950 crore (Rs 469.5 billion).

Of the debt, loans for aircraft buying are Rs 20,185 crore (Rs 201.85 billion) and working capital loans are Rs 22,165 crore (Rs 221.65 billion).

It has a turnaround plan in which it has demanded equity infusion of Rs 43,000 crore (Rs 430 billion) till 2021.

For the current financial year, it wants Rs 8,373 crore (Rs 83.73 billion), an upfront equity infusion of Rs 6,600 crore (Rs 66 billion) and support of Rs 1,772 crore (Rs 17.72 billion) in the form of a guarantee on short-term loans for this financial year.