Bailing out Air India

The Group of Ministers formed to turn around Air India has recommended that the government should infuse equity of Rs 23,000 crore into the ailing national carrier by 2020-21. This includes Rs 6,500 crore this year. So, if the Cabinet agrees, the government will have to invest Rs 16,500 crore over the next eight years. It is not clear if the investment will be front-loaded or back-loaded; if it’s evenly spread out, the bill will come to Rs 2,062.5 crore per year. The guarantee that the ministers want in return from the inefficient airline is that it should raise its flight occupancy from 69.5 per cent now to 73 per cent by 2015 and 75 per cent by 2020, and its traffic should grow at 12 per cent a year from five to six per cent now. The market is growing at around 20 per cent; so this is a reasonable demand.

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