The civil aviation ministry has moved a draft Cabinet note proposing a bailout package worth Rs 2,500 crore for National Aviation Company of India (NACIL), which runs Air India. The final package is likely to be put in place by January 2009 after views of all ministries concerned are taken into account.

 

NACIL has been asking the government to provide financial help to meet its working capital requirement and expansion plans. The company had to bear an additional burden of Rs 2,310 crore on account of high jet fuel price during April to October.

 

The domestic aviation sector has been bleeding on account of high jet fuel prices and is one of the worst affected sectors from the downturn in the economy. It lost nearly Rs 4,000 crore during 2007-08 and the accumulated loss is expected to double in the current fiscal.

 

Air India, the country’s largest airline by market share, operates about 150 aircraft in the domestic and international market. The airline recently pulled out its service from various commercially unviable sectors to reduce cost. It expects to save Rs 1,200 crore by rationalizing operation and optimizing its resources.

 

The airline shares almost half of the total industry losses. While it recently cleared dues of about Rs 1,000 crore to oil marketing companies, it still owes a whopping Rs 739.5 crore to Airport Authority of India.