Air India's turnaround plan approved

New Delhi -  Beleaguered flag carrier Air India can now look forward to a total rehaul of its financial and operational efficiency, with the government Thursday approving its much-awaited comprehensive turnaround plan.

But another decision on the entry of foreign carriers into domestic commercial aviation sector was deferred by a meeting here of the federal cabinet presided over by Prime Minister Manmohan Singh.

A decision on this is now expected next week, said Civil Aviation Minister Ajit Singh, who was among those at the cabinet meeting. Officials said some ministers wanted some more clarity before applying their minds to the issue.

According to officials in Rajiv Gandhi Bhavan, the office of the civil aviation ministry, the board of Air India had already approved the restructuring plan after which a consortium of its lenders had given the go ahead to its debt reconstruction plan.

Air India had borrowed some Rs.21,412 crore towards acquisition of new aircraft, another Rs.22,368 crore towards working capital and owes around Rs.2,000 crore to oil retailers, besides facing accumulated losses worth Rs.22,000 crore.

The financial restructuring had involved Rs.18,000 crore by a consortium of 19 banks led by the State Bank of India under which Rs.10,500 crore will be converted into long-term debt with a repayment period of 10-15 years.

The remaining Rs.7,400 crore will be repaid through government-guaranteed bonds. Earlier, the government had announced an infusion of Rs.4,000 crore during the current fiscal to increase the airline's equity base to Rs.7,345 crore.

The comprehensive turnaround plan involves an operational aspect along with a financial restructuring plan to help Air India improve its functional and financial position, officials said.