India's unprofitable state-owned Air India Ltd. is set to receive 300 billion rupees ($5.8 billion) in bailout money from the country's government as it struggles with tough competition and high fuel cost.
The equity cash injection, on top of the 32 billion rupees the company already has received since April 2009, will be administered through 2020, subject to performance milestones such as the percentage of seats filled, Aviation Minister Ajit Singh said Friday in a press conference, according to Bloomberg News.
The deal also involves debt restructuring and spinning off its maintenance and ground-handling units, which will be able to take jobs from other airlines. The Mumbai, India-based company will also sell airplanes to leasing companies to raise cash quickly, and then lease the airplanes back with monthly rental payments.
Singh expects these measures to allow Air India to record an operating profit by 2018, something the company has not achieved in the last five years.
He also said the Indian government will soon decide if other struggling domestic airlines will be able to raise cash from foreign investors.
The Indian airline industry has struggled in recent years as surging fuel prices and intense competition have limited revenues and driven up costs.
Air India is also burdened by the debt of purchasing over 100 airplanes before the global financial crisis, wrongly anticipating a coming surge in air travel, according to the Wall Street Journal.
Singh noted that the company hasn't been able to pay salaries for a long time, according to the Journal. It also owes money to airport authorities, he said.