AI to issue Rs 7,500 cr shares to its bankers

New Delhi: A proposal to issue preferential shares worth Rs 7,500 crore to Air India's lenders was approved by its Board on Thursday, as the national carrier saw significant rise in its yields and passenger revenue.

The Board, at its meeting, "approved the rearrangement of authorized share capital by issue of preference shares worth Rs 7,500 crore, which are proposed to be allotted to the lenders of the working capital as part of the Financial Restructuring Plan (FRP)," an Air India spokesperson said.

In another development, he said a cabinet note is being moved by the Civil Aviation Ministry for the purpose of equity infusion in Air India and to approve the restructuring plan.

While its yield went up by 10 per cent in November, Air India's passenger revenue also rose by 12.3 per cent. The Board, which reviewed the Directors' Report on the airline's performance in 2010-11, was also briefed on the progress made in implementation of the FRP, including the debt recast plan finalised at a meeting of the bankers' consortium late last month.

The State Bank of India, as leader of the consortium, has approached Reserve Bank of India for certain additional dispensations in the provisioning norms, the spokesman said.

The bankers have sought an extension of provisioning norms so that the provision could be spread over five financial years.

Air India officials said the issue "has already been taken up with RBI and their reply is awaited".

The officials also maintained that Air India had the "full support" of its lenders to conclude this arrangement within 120 days of the RBI approval, that is before the middle of March next year.

Air India's debt recast plan as approved by RBI includes conversion of short-term working capital loan of Rs 7,000 crore into cumulative preferential shares and more time to repay the remaining debt amount of approximately Rs 14,000 crore.

The airline has total of Rs 21,511.10 crore as short-term working capital loans and it pays an interest of over Rs 2,600 crore annually.

Air India's key performance indicators like passenger revenue, passenger carried and yield, in the April-November period, also showed improvement compared to the corresponding period of last year, the spokesperson said.

The Board was informed that the airline's passenger revenue went up by 12.3 per cent, yield grew by 10 per cent, number of passengers carried by 7.7 per cent and average seat per kilometre (ASKM) by 1.9 per cent.

The national carrier maintained a domestic load factor of almost 75 per cent (74.9) and international load factor of 64.1 per cent.

The Board also approved the appointment of Vinod Asthana as the Managing Director of Hotel Corporation of India Limited, a wholly-owned subsidiary of Air India, he said.