Air India to get Rs.400-cr state aid by January

The state-owned National Aviation Co of India Ltd (NACIL) that runs the loss-making Air India will get the first instalment of equity infusion from the government worth Rs.400 crore (Rs.4 billion/$80 million) by January, the company said Tuesday.

'The group of ministers has recently assured support to the national carrier in the form of equity infusion and the first instalment of Rs.400 crore is expected by January 2010,' the company said in a statement.

The announcement comes after Civil Aviation Minister Praful Patel last week said the government has agreed to infuse Rs.800 crore into the beleagured airline, which posted a loss of Rs.7,200 crore last fiscal.

'Further instalments would be tied up to the milestones of savings effected on account of cost-cutting exercise at various levels,' the carrier said.

'We are simultaneously taking effective measures to enhance revenue to the extent feasible in today's market environment. We will also aggressively rationalize its fleet size and network besides pruning non-core activities in the coming months,' NACIL said.

Based on a monthly review of Air India's cost-cutting measures, the group of ministers on civil aviation, led by Finance Minister Pranab Mukherjee, recommended the equity infusion.

However, it also asked Air India to reduce costs by at least Rs.2,000 crore by the end of the current fiscal.

The airline is also putting in place a payment plan to clear the arrears of various vendors following improved booking position between December-February, generally considered good months for the aviation industry.

As per data released by the Directorate-General of Civil Aviation (DGCA), Air India has improved its performance with impressive gains in domestic market.

The carrier's domestic market share, which was 16.6 percent in August, rose to 17.5 percent in September and climbed to 18.6 percent last month.

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