The Indian government has approved an eight billion rupees ($173 million) equity infusion into loss-making national carrier Air India.
India's cabinet committee on economic affairs approved the equity infusion for the airline's parent company National Aviation Company of India (NACIL), and the funds will be released in two equal monthly instalments, says the government.
"The equity induction will not only ease the cash flow situation of the company, but it will also preclude borrowing from the markets at a high cost," it adds.
NACIL's present equity capital of 1.45 billion rupees is insufficient for an aviation company of it size, says the government.
Air India posted a net loss of 56 billion rupees for the fiscal year ending 31 March 2009 after being hit by the economic downturn and higher fuel prices.
It has embarked on a turnaround plan to stem losses, and aims to save 19 billion rupees in its current financial year.
The airline plans to reduce its fleet size to 105 aircraft from 146 by March 2011, as well as cut its staff strength.
Air India has shown an improvement in its financial performance for the first half of its current financial year compared to the year before, says the government.
"The number of revenue passengers carried increased from 5.32 million to 5.61 million," it adds.
Air India's operating loss of 20.3 billion rupees is also 23% less than the corresponding period a year ago, it says.
Source: Air Transport Intelligence news
