Pre-sale blues: Air India loss balloons by ~20 billion

Contrary to the popular perception that Air India made a turnaround in the past few years, figures show its loss widened instead. According to figures provided in Parliament by Minister of State for Civil Aviation Jayant Sinha, the state-owned carrier registered a loss of ~57.65 billion in FY17, ~19.29 billion more than ~38.36 billion loss in FY16.

The figures reflect significant deviation from the minister’s own parliamentary disclosure on July 27, 2017. Sinha had then said that Air India’s provisional loss for FY17 was ~37.28 billion — almost ~20 billion less than the actual figure.

Questions sent to Sinha’s office did not elicit any response till the time of going to press.

An Air India executive said the inflation in losses was likely due to certain non-disclosures by the company in the provisional figures. “The original provisional figures were conservative estimates. The new figures include additional provisioning arising out of the Dharmadhikari Report and demands from Serve from India Scheme (SFIS), which can no longer be utilised as the scrips have expired,” he said. The total claim from the SFIS amounts to ~11.55 billion.

This raises questions about the company’s accounting policy, as SFIS claims for airlines were discontinued by the government in January 2011.

In fact, during its audit of the airline’s account books for FY15, the Comptroller and Auditor General (CAG) had pointed this out, saying government clearance was necessary for renewal of expired scrips and issuance of scrips, which was not available with the company.

“Hence, necessary provision should have been made for the expired and unapproved SFIS scrip claim amounting to ~11,551.5 million. However, this has not been done. Therefore, the loss of the company stands understated,” the CAG wrote.

The audit highlighted 14 instances where the proper accounting process was not followed. Seven of them state the airline had not followed prescribed accounting standards; five are on non-provision of amounts as mandated by accounting standards; one qualification was over a change in the accounting policy on inventory and one on certain balances not being reconciled.

The airline’s accounting process also came under scrutiny recently when Civil Aviation Minister Ashok Gajapathi Raju said the company’s debt could turn out to be 40 per cent higher than previously expected, as the airline’s books had not been evaluated properly. “When our exercise of calculating Air India’s debt began, we found the sum was hovering around ~50,000 crore (~500 billion). But I will not be surprised if the total debt reaches ~70,000 crore (~700 billion). Since people are looking at the books carefully, they may find more,” the minister had said.

The figures reflect significant deviation from Jayant Sinha’s own parliamentary disclosure on July 27, 2017. He had said that the provisional loss for Air India in FY17 was ~37.28 bn