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Jun 25, 2009 at 01:08am IST

PM assures all help for cash-strapped AI

New Delhi: Even as the world is in the grips of an economic slowdown, the Prime Minister of India is facing a tough question - should he spend Rs 14,000 crore of the taxpayers' money on an ailing Air India?

After a meeting with Prime Minister Manmohan Singh to discuss a bailout package for the airline, Aviation Minister Praful Patel has said that the PM has assured full support to Air India, to help it tide over its financial crisis."

ALSO SEE Talking point: Should Air India get bailout?

The Prime Minister however, reportedly told Patel that the pride of India will have to go through a re-structuring of the top brass.

"The Prime Minister has said that the entire weight of the government is behind Air India. It is a national carrier and it is our pride. But there is conditionality that Air India must put its best foot forward. The employees must realise that there is a problem and it is a cumulative problem," Patel said after the meeting.

ALSO SEE Air India fighting daily losses of over Rs 15 cr

Patel said that he had been asked to make Air India leaner and trimmer, and that the employees will have to put their best step forward to help AI retain its lost glory.

While Praful Patel admitted that it is not an easy time for aviation in general, Air India in particular needed to be more competitive.

ALSO SEE Air India in crisis, seeks Rs 10,000-cr bailout

"The airline will have to undergo a serious restructuring from within both organisationally, financially and manpower wise. Until and unless serious steps are taken to improve the functioning and the financial viability, it would

be difficult for the government to continue supporting the

airliner," he said.

The minister said no figures have been given for the bailout and all media reports in this regard were hypothetical and may be based on some sectional views of departments. But he also said bailout did not mean endless cheques being written by the Government in support of Air India.

On its part, the cash-starved carrier is looking at cutting its wage bill by over Rs 500 crore from about Rs 31,000 crore per year. It could also consider VRS and cutting off excess staff, rationalising routes and leasing some of its prime properties.

"The steps that are necessary to be taken to make the carrier profitable," said Praful Patel. He added that every employee should understand that there "is something seriously wrong if their salaries are delayed".

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. 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.

Meanwhile, the airline has chalked out a plan to revive itself.

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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