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AI needs Rs 12,000-14,000 cr to save itself


Karma Paljor,CNN-IBN
Jun 24, 2009 at 06:17pm IST

New Delhi: Air India officials met Civil Aviation Minister Praful Patel on Tuesday in a closed door meeting to finalise a bailout proposal for the cash-strapped organisation. There is no official word on the proposal but CNN-IBN has exclusive details of what the airline plans to do.

It will have to convince the Government that the management will revive the airline in five years and give an assurance if it is to receive a bailout. Highly placed sources also say the Civil Aviation Ministry will approach the Government in two weeks.

Official sources say that the requirement is for about Rs 12-14,000 crore which could be funded in parts, a part of it as a Government equity infusion and part as a soft loan or a one-time grant. But the figures have still not been finalised.

However, it is unlikely to be cleared in this Budget as there are only two weeks left.

Meanwhile, the airline has chalked out a plan to revive itself. This will be useful when the airline approaches the Government for a bailout.

The airline is looking at cost cutting measures like:

  • A cut in its wage bill by over Rs 500 crore from about Rs 3,100 crore per year.
  • The airline could also look at offering VRS and cutting access staff.
  • Old and leaded aircraft will be phased out in a systematic manner.
  • It is also looking at a massive route rationalisation programme.
  • It could pullout of unprofitable routes despite opposition from politicians.
  • Leasing some of its prime properties around the country is also an option the airline is studying.

Despite all this, it will be a difficult exercise for an airline which is making a loss of over Rs 15 crore every day.

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