Published On: Tue, Feb 7th, 2017

AI expected to post ‘improved’ operating profit margin: Minister

New Delhi: National passenger carrier Air India is expected to post an “improved” operating profit margin in 2016-17, the Civil Aviation Minister said on Tuesday.

The minister pointed that ‘liquidity constraints’ continue to impact the smooth performance of the company

“In the Financial Year 2016-17 also, the company has been steadily improving its all-round performance,” Minister of State for Civil Aviation Jayant Sinha informed the Rajya Sabha.

“It is expected that the company would again post an improved operating profit margin in the current year also,” Sinha was quoted as saying in a ritten reply to a question.

In the Financial Year 2015-16, the company had posted an operating profit of Rs.105 crore.

The operating profit or earnings before interest and tax (EBIT) is the difference between gross profits and operating expenses before deduction of interest and taxes.

According to Sinha, since the implementation of the Air India’s Turnaround Plan, there has been a constant improvement in the airline’s operational as well as financial performance.

On April 12, 2012, the flag carrier got a new lease of life when the government approved a Rs.30,000 crore turnaround (TAP) and financial restructuring plans (FRP) spanning around 10 years period.

The multi-billion-rupee bailout package came with stringent riders like maintaining high on-time performance and healthy load factors.

However, the minister pointed that ‘liquidity constraints’ continue to impact the smooth performance of the company.

“In this connection the company has been making constant efforts for substituting its high cost working capital loans with long term low cost debt,” the minister explained.

“Air India has been in consultation with various banks in this direction so that the interest costs can come down substantially in the coming years.”

Sinha elaborated that the impact of ‘liquidity constraints’ have been met by the equity infusion by the central government.

On February 1, 2017, Finance Minister Arun Jaitley proposed to infuse an additional equity of Rs 1,800 crore in the cash-strapped national passenger carrier for 2017-18 fiscal.

The government had allocated Rs 1,713 crore to the flag carrier as budgetary support for 2016-17 with a total outlay of Rs 2,065 crore.

In contrast, the revised estimates for 2016-17 showed that the state-run airline’s budgetary support reached Rs 2,465.21 crore with a total outlay of Rs 2,900.21 crore.

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