AI turnaround plan on Cabinet agenda next week

Issues like wage rationalisation,equity infusion & operationalisation of SBUs on cards

The proposal for second shot of equity infusion in the cash-strapped national carrier,Air India,is likely to be put up before the government next week,sources said. The proposal will also include two key issues of wage rationalisation and operationalisation of Strategic Business Units (SBUs),which will determine the success of Air Indias turnaround plan.

After holding extensive consultation with various wings of the government on Rs 1,200 crore bailout,this is the first time that the civil aviation ministry will be knocking on the doors of Cabinet Committee on Economic Affairs (CCEA) with its proposal. The airline is facing an acute cash problem and is feared that it may not be able to pay its around 30,000 employees beyond March,an official said. Operationalisation of SBUs like ground handling and maintenance,repair and overhaul will help the carrier to have independent profit centres. It will also help the company to rationalise its manpower and deploy them in these SBUs, the official said.

On the issue of wage rationalisation,the airline needs governments assent before it can renegotiate any wage agreements with the unions. For the airline,the chips are down as both the finance ministry and the home ministry have rejected the equity infusion proposal. While the home ministry had rejected the proposal with a terse one-liner,we do not support the proposal,the finance ministry has supported the other two proposals. Official sources said that the government does not have much of a choice other than cash infusion if they want to keep the carrier afloat.

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The Group of Ministers (GoM) on aviation,monitoring Air Indias turnaround plan had tied Rs 2,000 crore equity infusion to five trigger points.

First was completion of route rationalisation initiatives and second was kicking-off of Passenger Scheduling System (PSS) and other IT-related projects. To avail the next installment of Rs 1,200 crore,Air India was to meet three other trigger points relating to rationalisation of contract and casual employees; and induction of independent directors and chief commercial officer (COO) in the airline. The fourth and fifth trigger points include leasing out of 3 Boeing 777-200 LRs,operationalisation of SBUs,reduction of staff costs and reduction in fleet.

The finance ministry and the home ministry have pointed out that the carrier has failed to deliver on the three trigger points essential for equity infusion, said an official. The carrier is staring at accumulated losses of over Rs 7,000 crore,debt of Rs 40,000 crore including Rs 18,000 crore working capital loans.

Independent directors in their meeting with the Prime Ministers Office in November had categorically stated the airline needs one large injection of funds and small doses of equity infusion may not be able to pull out the carrier from its current state. In February this year,the CCEA had approved Rs 800 crore as the first installment of the total Rs 2,000 crore lifeline approved by the GoM in October last year.

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