India's ailing national carrier Air India may see operations grind to a halt as it struggles to keep up interest payments on its substantial debt burden, a newspaper reported Friday. The Hindustan Times said the national carrier had failed to pay service tax and interest on its debts since March 31 and its creditors might freeze its accounts or other assets against which loans were secured.
Air India declined to comment on the report when contacted by AFP but a spokesman said that its financial problems would be eased if a restructuring plan were cleared soon. "Once the financial restructuring plan comes into the line of operation, debt burdens will be taken care of," the spokesman said on condition of anonymity.
Air India is waiting for approval of a five-year turnaround plan, including a government cash injection and a new business plan that would increase its fleet size, cut routes and set up network hubs. The government in New Delhi pumped about eight billion rupees ($180 million) into the airline in the financial year 2009-10 and expects to put in another 12 billion rupees this year on condition the company cuts costs.
The restructuring plan is currently under review. Private airlines like Jet Airways, Kingfisher and low-cost rivals like Indigo and SpiceJet have swiftly replaced Air India as a preferred airline in recent years. Air India is currently fifth by market share, with a 13.2 percent share, according to the country's aviation ministry. In April this year, Air India operations were hit when hundreds of pilots went on strike over pay and conditions, leading to the cancellation and disruption of hundreds of flights and estimated revenue losses of $35 million.
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