Patel said that in view of the adverse financial conditions, it was important that government infused equity into the airlines and also made a provision for a soft loan. He also cited various issues such as surge in oil prices, working capital requirements, high coast loans and leases, for the financial mess at Air India.

Replying to a calling attention motion tabled by Prakash Javedkar and other MPs in the Rajya Sabha today, the minister also said that operating non-economic flights in national interest that have not been compensated were also responsible for mounting losses.

Patel also said that acquisition of new aircrafts to meet the competition and provide better customer service also adversely affected the profits of airline. The minister also said that global economic recession and slowdown had also lead lowered seat occupation levels causing lower yields and losses across the board.

Before the merger, the civil aviation minister informed the Upper House, the erstwhile Air India and Indian Airlines had incurred a loss of Rs 541.30 crores and Rs 230.97 crores respectively during 2006-07. In 2007-08, the combined airline posted a loss of Rs 2226 crores and during 2008-09, the expected loss is approx Rs 5000 crores. The accumulated losses of NACIL as on March 31, 2009 is likely to be in the range of Rs 7200 crores.

The Union civil aviation minister also cited various measures to streamline operations and cut losses that include rationalisation of routes to cut losses on traditionally loss making routes, rescheduling/cancellation of future aircraft deliveries, return of leased capacity at the earliest, a complete rationalisation of manpower and productivity linked incentives, reduction of contractual employment, review of all agreements on all technical and operational matters, constitution of a turnaround committee, aligning all operational and technical agreements to reflect present market conditions.