New Delhi: A day after its lenders approved its debt restructuring plan, Air India on Tuesday decided to go in for sale-and-leaseback option for Boeing 787 Dreamliners instead of their outright purchase, as its Board reviewed the latest financial position of the cash-strapped company.
The Board, which reviewed Air India's operations and the implementation of its turnaround programme and Financial Restructuring Plan, also decided to lease out excess capacity of two Boeing 747-400 planes and some 777-200 LR aircraft after the Dreamliners were inducted, a spokesperson said.
As per AI's plans, the acquisition of 14 of the 27 Boeing 787 Dreamliners that will join its fleet by 2014, is likely to be made through sale-and-leaseback.
Sale-and-leaseback or leaseback in short is a financial transaction where one sells an asset and leases it back for the long-term. Hence, one is able to use the asset continuously but does not own it.
The Board, at its meeting on Tuesday, approved the issuing of Request for Proposal (RFP) for the B-787 planes under leaseback mechanism "pending a final clearance from the government", the spokesperson said.
The airline's top brass also reviewed the decision of the 13-bank consortium, led by State Bank of India, to approve the debt restructuring programme, subject to certain clarifications from the Reserve Bank of India which had last week given a nod to it.
Seeking to turnaround ailing Air India, Government is considering a nearly Rs 30,000 crore package for the state-owned national carrier over a period of 10 years.
According to the proposal, government is considering writing off Rs 4,500 crore cash loss of Air India, infusing additional equity of Rs 6,750 crore and Rs 17,000-18,000 crore for its fleet acquisition programme.
Airline sources said supply of food to passengers on flights below 90 minutes may be stopped. The move, if taken, would save about Rs 20 crore per annum for the company.
While reviewing Air India's financial position, the Board was informed that while passenger revenue for 2010-11 increased by Rs 1,294 crore due to growing yields.
However, the major negative factor impacting its profitability was a hike of Rs 1,097 crore or 18 per cent in fuel costs, the spokesperson said.
The other factors which adversely affected its financial bottomline included a hike in wage costs by Rs 295 crore due to increased gratuity provision, rise in depreciation by Rs 300 crore due to addition in fleet and increase in interest costs by Rs 860 crore caused by increase in borrowings and a hike in the rates.
The airline Board was informed that the company was in the process of implementing the Financial Restructuring Plan which would provide a saving of Rs 1,000 crore per annum by way of interest costs.
As per the plan approved by a Committee of Officers of the government, Air India was aiming to achieve an overall load factor of 73 per cent in the near future.
Among the key performance indicators, its passenger revenue for October showed an increase of 5.2 per cent even after reduction of capacity by 2.9 per cent compared to the same period last year.
While passengers carried rose by 4.9 per cent, passenger load factor improved by 2.6 per cent and the average yield per RPKM (Revenue Passenger per Kilometre) improved by four per cent, the spokesperson said.
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