Air India's ₹10,000 cr funds have a cashflow issue

Mumbai: Air India is seeking approximately ₹10,000 crore in fresh loans from banks to finance fleet expansion, aircraft refurbishment and operating costs, despite some lenders' reluctance to provide new credit due to unclear cash flows, according to sources familiar with the situation. The airline, which maintains a AAA credit rating, has seen its losses more than double to ₹22,238 crore in the fiscal year ending March 2026 from ₹10,858 crore a year earlier.

Some private sector banks have requested more information on Air India's cash flow situation and turnaround plans before extending new loans, while state-owned banks are more inclined to renew existing credit lines due to their long-standing relationship with the Tata Group and the airline's high credit score, indicating low risk.

Tata Group declined to comment, but an official noted that the conglomerate has never struggled to raise funds for its companies due to the strength of the Tata brand. An official close to the matter stated that all new businesses, particularly in the aviation sector, experience a period of unprofitability as they become profitable.

Air India's ongoing discussions involve loan rates, and the airline has already secured a significant loan from a major bank. While lenders are reassured by Tata Sons' continued 51% stake in the airline, they are concerned that loan repayment may depend on continued equity contributions from the promoters, as Tata Sons holds 74.9% of Air India, with Singapore Airlines owning the remaining 25.1%.

In June, Tata Sons approved a capital infusion of over ₹10,000 crore, its largest investment in the airline since acquiring it in 2021 for ₹18,000 crore. Lenders are also seeking clarity on the future of N Chandrasekaran, the chairman of Tata Sons and Air India's board. Air India holds nearly ₹40,000 crore in outstanding debt, with State Bank of India being its largest lender, followed by Bank of Baroda and Punjab National Bank, as per Crisil's disclosures.

Strategically important to the Tata Group, Air India was acquired from the government through the group's wholly-owned subsidiary Talace Pvt Ltd as part of the disinvestment program, making the Tata Group India's second-largest aviation player after IndiGo.