The Tata group is in discussion with banks to raise working capital loans worth Rs 15,000 crore for AirIndia as it looks to revive the carrier that was bought from the government last year.
The money will be used to pay aircraft rentals, refurbish the fleet, cover day-to-day air operations and losses, and overhaul IT operations, Economic Times reported, citing people familiar with the matter.
The loan is likely to have a three-year term with a yearly reset rate between 7.5 and 8%, the report cited another person as saying.
Tata Sons won the bid to purchase Air India for Rs 18,000 crore in October last year through its subsidiary Talace.
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Talace last year raised Rs 23,000 crore of unsecured, unrated one-year loan from State Bank of India (SBI), HDFC Bank and Bank of Baroda, at 4.25%. The loan is due to be renewed at the end of January.
Increasing interest rates and a lack of liquidity in the system will increase borrowing costs, Economic Times reported citing a bank official.
The total losses incurred by Air India as of the end of March 2021 were Rs 83,916 crore. It lost an additional Rs 9,556.5 billion in FY22.
The airline aims to triple its current fleet of 113 aircraft in the next five years. In September, it agreed to lease five Boeing wide-bodies and 25 Airbus narrow-bodied planes for the next few years. The planes will be added to the fleet in 15 months, starting in December. The carrier has also agreed to short-term leases which might be expensive.
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Tata group is also investing in IT integration. As per reports, it has formed six verticals to completely overhaul the airline's back end. Meanwhile, AirIndia is reportedly rebuilding its core crew, recruiting seasoned executives from other airlines and paying them up to 50% more than market rates.
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