AL needs more funds to stay alive CAG


Inefficiencies of state-run Air India may mean that a lot more public money will be needed to keep the Maharaja alive than earlier envisaged, especially with the public sector carrier "significantly understating" its losses. The CAG's performance audit report of the airline was tabled in Parliament on Friday, which said the government may have to reassess the fund requirement for the airline.
 
The auditor says AI understated its losses. "Though AI reported a positive ebitda of Rs 166 crore (April-December 2014) from a negative Rs 191 crore (April-December 2013), both the statutory auditor and the CAG had expressed qualified opinion on AI's accounts for all the three years (2012-13 to 2014-15), pointing out significant understatement of losses in (its) financial statements. The understatement of losses were Rs 1,456 crore (2012-13), Rs 2,967 crore (2013-14) and Rs 1,993 crore (2014-15). Considering (these)..., the ebitda of AI would be negative (up to March 2015,)" the auditor says in its press note. In 2012, UPA-II had approved equity infusion of Rs 42,182 crore in AI over a 20-year period under a financial restructuring plan (FRP).
 
 
In its report on AI's actual performance vis-a-vis the FRP, CAG "acknowledges the efforts made by the company" to reduce cost and improve aircraft utilisation, it expresses "significant concerns on its future financial status" and "overall operational performance".
 
 
The FRP required AI to raise Rs 5,000 by monetising assets in a decade from FY 2013. "AI failed to earn the targeted annual revenue of Rs 500 crore, with assets valued at Rs 64 crore only being monetised. This resulted in a resource gap of Rs 1936 crore during the period from 2011-12 to 2015-16," it said.
 
 
In 2005-06 during UPA-I, erstwhile AI had ordered 50 wide body aircraft from Boeing worth Rs 33,197 crore and erstwhile Indian Airlines had ordered 43 narrow body from Airbus worth Rs 8,400 crore. "The airline had over-provisioned wide body aircraft ... , while it had an acute shortage of narrow body aircraft. Even though the company was aware of the shortage and had initiated the process of leasing Airbus A-320 aircraft as early as July 2010, only five aircraft could be inducted by March 31, 2015, against the requirement of 19," the auditor, which had earlier also questioned AI's wide body order, said. in the latest reportWhat's more, AI failed to efficiently use the aircraft it had. "Aircraft remained grounded for prolonged periods due to non-availability of components, spares, serviceable engines which led to cannibalisation and more protracted grounding periods. While the aircraft remained grounded, the airline paid substantial amounts for their lease rent (for leased aircraft) or finance cost (for owned aircraft."
 

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