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    Default Air India turnaround plan, Dreamliner induction gets govt nod

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    Air India, the state-owned carrier, got a big boost on Thursday when the government approved a turnaround plan (TAP) to restructure the operations and finances of the cash-strapped airline.

    The plan, approved by the Cabinet Committee on Economic Affairs (CCEA), includes infusion of additional equity.

    "The turnaround plan of Air India has been approved," Civil Aviation Minister Ajit Singh told reporters after the CCEA meeting.

    As part of the airline's restructuring plans, the government had announced infusion of Rs 4,000 crore during the current financial year in the Union Budget 2012. This would raise the airlines' equity base to Rs 7,345 crore.

    The issue of induction of the much-awaited Boeing Dreamliner-787, part of the TAP, was also given the green signal by the CCEA, official sources said.

    US aircraft manufacturer Boeing is expected to deliver the first of the 27 Dreamliners, ordered in 2005, to the national carrier next month. The delivery of these aircraft was initially to commence from 2009 but the US aircraft-maker deferred it for various reasons, including labour unrest.

    State Bank of India-led consortium of 19 banks had last month approved the financial restructuring plan (FRP), which includes debt restructuring of Rs 18,000 crore by the banks and a committed equity infusion by the government.

    FRP would provide relief to Air India from its debt servicing obligations on working capital, in the form of a substantial reduction in interest outlays while giving it the necessary time to improve its operational efficiency and implement the TAP.

    As part of the FRP, Air India had signed four agreements with the banks' consortium on March 31 - the Master Restructuring Agreement, Working Capital Facility Agreement, Appointment of Facility Agent Agreement and Appointment of Trustee Agreement.

    A major highlight of the agreements include conversion of about Rs 10,500 crore of the airline's working capital into long-term loan, carrying an annual interest of 11 per cent.

    "The first year interest would accumulate in a funded interest term plan," the sources said, adding these would lead to substantial savings of about Rs 1,000 crore in 2012-13 itself.

    In addition, non-convertible debentures (NCDs), guaranteed by the government, worth Rs 7,400 crore, would be issued and subscribed by the investors. The proceeds from the NCDs would be used to repay the lenders, they said.

    Apart from this, part of the working capital of about Rs 3,500 crore would be restructured as cash credit arrangement.

    Under the FRP, Air India has proposed that the government should infuse equity of about Rs 30,231 crore in the 2012-21 financial period.

    The government has so far infused equity of Rs 800 crore in 2009-10, Rs 1,200 crore in 2010-11 and another Rs 1,200 crore in 2011-12.

    The debt-ridden carrier has outstanding ***** and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore long-term loan on fleet acquisition, Rs 4,600 crore vendor dues besides an accumulated loss of Rs 20,320 crore.



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