Indian gov't works on rescue package as AI, Jet struggle

The Indian government is working on a rescue package for the country's embattled airlines as both Air India (AI, Delhi International) and Jet Airways (JAI, Mumbai International) are struggling with piling debts and losses, a secretary in the Ministry of Civil Aviation, Rajiv Nayan Choubey told Reuters.

Choubey did not give any details regarding the planned rescue package but said it would come on top of the INR9.8 billion rupee (USD136.5 million) government capital infusion into the struggling flag carrier.

The central government will additionally extend a INR21 billion rupee (USD292.5 million) guarantee to Air India, Choubey added. On September 6, the flag carrier already invited offers from domestic and foreign banks for INR5 billion rupee (USD69.6 million) in credit guaranteed by the state.

All above measures exceed the current Air India turnaround plan, approved by the previous government in 2012.

Air India also asked the state to exempt it from lease transfer fees related to the planned sale of the carrier's skyscraper in Mumbai. The Free Press Journal has reported that the government is unwilling to grant this request as it would lose as much as INR600 million rupees (USD8.4 million) in the process.

Choubey also told LiveMint that the government had already incorporated a Special Purpose Vehicle (SPV) to store Air India's debt and planned to approve a new turnaround plan by the end of September.

For its part, Jet Airways said it had entered into talks with its employees regarding unpaid August salaries. The carrier earlier admitted it had delayed payments to 15% of its workforce, well over 2,000 persons, as it struggles to preserve cash.

CAPA forecasts that the Indian airlines would lose a total of USD1.9 billion during the current financial year, ending on March 31, 2019. Despite the growing demand, the country's airlines have been struggling with rising oil prices, a falling rupee, and domestic price wars. Full-service carriers Air India and Jet Airways have been hit much more severely than LCCs such as IndiGo Airlines and SpiceJet.