Air India to reduce aircraft loans using government dole

National carrier will now reduce its aircraft loans after Finance Minister Arun Jaitley allocated Rs 1,800 crore to retiring debt that has been raised to fund fleet expansion of the debt-laden airline.

The airline has debt of about Rs 45,000 crore on its balance sheet: of the loans, Rs 14,000 crore are aircraft loans, while the rest are working capital funds that include non-convertible debentures of Rs 7,500 crore.

In the last fiscal, FY16, the airline posted a net loss of Rs 3,837 crore as compared to Rs 5,859 crore in the previous year.

While the allocation for the 2018 fiscal is about Rs 1,000 crore lower than Air India's demand of .Rs 2,800 crore, the national carrier expects the government will release more funds later.

"Of the Rs 2,800 crore we had sought, Rs 1,800 crore is for repaying aircraft loans and the rest was for compensation on account of the rupee's movement against the dollar, something that has increased the cost of servicing our aircraft loans,” a senior Air India executive, who did not want to be identified, told ET.

The Rs 46,000-crore debt continues to be a drag on the carrier, and Air India chairman Ashwani Lohani had recently told ET that the government's financial support was needed to prevent a further pile-up of loans.