India's civil aviation minister asked the finance ministry on Tuesday for funds to strengthen state-owned carriers Air-India and Indian Airlines ahead of their expansion.
Praful Patel told reporters after a meeting with the finance minister the funds were necessary to boost equity of the two airlines before they expand capacity to meet competition from private carriers in the international and domestic markets.
"In principle, the finance minister was positive for further equity infusion in Air-India and Indian Airlines," Patel said.
International flag carrier Air-India has an equity base of 1.54 billion rupees (USD$33.3 million), while the mostly domestic Indian Airlines has a share capital of 1.05 billion rupees (USD$22.7 million).
Both have drawn up aggressive fleet expansion programs, but their small equity could restrict their ability to raise loans to fund the purchases.
Air-India plans to buy a mix of 28 Airbus and Boeing jets at a cost of USD$2.16 billion, while Indian Airlines aims to acquire 43 Airbus planes for USD$2.18 billion.
Both plans await government approval.
The two airlines have steadily lost market share over the last 10 years owing to an inability to expand their fleet. They now aim to lease aircraft to meet rapidly growing air travel demand.
Patel said he had also spoken to the finance minister about withdrawing a 42 percent withholding tax on the leasing of planes imposed by the July 8 federal budget. He said his ministry would now wait for the finance minister's final decision on the tax.
