Air India's banks will own a chunk of the loss-making state carrier after its board approved issuing preference shares worth 75 billion rupees to lenders led by State Bank of Indias part of a financial restructuring.
A spokesman for the airline said it was not yet decided how big a stake the banks will own.
Earlier this year, lenders to private sector rival Kingfisher Airlines took a stake in the loss-making carrier controlled by liquor baron Vijay Mallya.
A consortium of Air India's lenders last month gave broad approval to its financial restructuring, as per a Reuters report, providing relief for the cash-strapped airline reeling under $4 billion of debt.
Air India's lending group has 26 banks. In addition to State Bank of India, IDBI and Bank of Baroda also have heavy loan exposure to the airline.
The restructuring plan must be approved by the federal government before it is implemented.
India's airlines are struggling with surging oil prices, high sales tax on jet fuel and below-cost pricing driven by fierce competition, leading to losses for most of them.
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