Air India aims to fly an annual 25 million travelers domestically and 15 million on overseas routes to break even in fiscal year 2015, Chairman Arvind Jadhav said. Photographer: Namas Bhojani/Bloomberg

The Indian government will guarantee the bonds, which will help the carrier cut interest costs, Civil Aviation Minister Praful Patel said in Mumbai yesterday. The company, which has been unprofitable since its 2007 formation, will get a 12 billion rupee ($256 million) equity infusion from the government this fiscal year, he reiterated.

Air India aims to fly an annual 25 million travelers domestically and 15 million on overseas routes to break even in fiscal year 2015, Chairman Arvind Jadhav said. India’s government must restructure the airline quickly as competition from domestic companies Jet Airways (India) Ltd. and Kingfisher Airlines Ltd. intensifies and overseas carriers like Singapore Airlines Ltd. expand into the country, an analyst said.

“They are taking little steps here and there,” said Binit Somaia, director for South Asia at the Sydney-based Centre for Asia Pacific Aviation. “They probably need to act faster. It requires decisive measures.”

The carrier plans to monetize its land and buildings by sale or as security for raising loans, the airline said in a statement yesterday.

Fine Tuning

National Aviation, formed by merging Air India with its domestic counterpart Indian Airlines, boosted traffic revenue 28 percent in the first quarter to 6.38 billion rupees while cargo revenue gained by more than half to 920 million rupees, the airline said. The carrier filled 75 percent of seats in the domestic sector during quarter while flying an average 36,000 passengers daily, it said.

The Indian government, which owns all of the airline, is “fully supportive,” Patel said after reviewing the turnaround plan with the company’s board. The government infused 8 billion rupees as equity into the carrier last year.

“This is the start, based on which further fine-tuning of the organization will be done,” he said.

National Aviation has already cut overlapping flights to reduce costs. The government estimates Air India may have narrowed losses in the year that ended in March to 54 billion rupees from 55.5 billion rupees a year earlier.

The airline may also cut costs by shedding as many as 7,000 jobs through retirements over the next three years, George Abraham, the Aviation Industry Employees’ Guild’s general secretary, told Bloomberg News last week. Air India isn’t planning job cuts, Patel said yesterday. In June last year, the airline delayed salaries by two weeks to its 31,000 employees as it ran short of cash.

Debt

The company had a debt of 152 billion rupees as of June last year, according to the government. National Aviation is seeking to refinance $1.15 billion of debt used for the purchase of 21 Airbus SAS planes to pare interest costs, according to its website. The company extended the deadline for bank bids to refinance the debt to Aug. 31.

National Aviation is the third biggest operator of domestic air passenger services with a 17.7 percent share behind Jet and Kingfisher, according to the ministry of civil aviation.

Earlier this year, the government appointed Anand Mahindra, vice chairman and managing director of Mahindra & Mahindra Ltd., India’s biggest sport-utility vehicle maker, and three others to the board of National Aviation. The airline also appointed Gustav Baldauf as its Chief Operating Officer.

Source: Bloomberg