In crisis,Air India wants it all: Let us live,let others die

The airline has drawn up a bailout package of about Rs 15,000 crore — Rs 5,000 crore as equity infusion and the rest as soft loans. This,sources said,would be cut by at least half to a total package of about Rs 5,000-7000 crore — that too,if the PM is convinced.

Some other demands are even more difficult to meet.

At a meeting with the PM’s Principal Secretary T K Nair and Cabinet Secretary K M Chandrasekhar,Air India demanded that sixth freedom rights to all foreign airlines be reviewed. This essentially allows foreign airlines to operate to multiple destinations within India. Already,the Civil Aviation Ministry is exercising greater caution with fresh requests,but sources said it would be impossible to simply abrogate rights settled through bilateral agreements with other countries.

The airline wants a freeze on capacities of foreign airlines so that Air India gets some breathing space. This would mean no further negotiations on air bilaterals to improve capacities and services by other carriers. It has also asked that private domestic carriers should be advised to give up their “surplus” route entitlements,particularly in revenue earning sectors like the Gulf so that Air India can gain.

It’s learnt that these suggestions have not gone down well with the political leadership,as this approach tends to not only undermine other carriers,but actually works on the old assumption that air bilateral agreements must be suited to Air India rather than be based on passenger demand.

It was suggested at the meeting that the Air India Board of Directors be strengthened by enlisting members who are experts in finance,law and hospitality in the initial phase. A rejig of the current board is also not being ruled out in the near future.

As Patel prepares for his meeting with the PM — possibly tomorrow — sources said a decision on lending any kind of government financial support will have to be based on a long-term plan for disinvestment of the airline. It’s learnt that the Civil Aviation Ministry is not averse to divesting up to 49 per cent stake over a period of time in the airline. However,any movement in this direction will depend on the PMO’s approach.

The current crisis in Air India is accentuated by the fact that it is overstaffed by about 50 per cent. Much of the surplus was to be absorbed by way of fresh ventures after the merger like setting up cargo operations and MROs that would add to revenues. But the merger has not moved smoothly,adding to the trouble.

In going ahead with its fleet augmentation programme and daily expenditure,the airline’s working capital is a little over Rs 16,000 crore — more than the financial turnover of the company,which stands at approximately Rs 15,000 crore. The market share of the airlines has declined by 9 per cent in the last three years in the domestic sector and by about 5 per cent in the international sector. The estimated losses of the merged Air India stands at about Rs 7,200 crore at the end of May. This,sources said,is in itself irregular for any bank to give loans,and thus the cry for financial relief.

The airline hopes that some measure of financial support from the government will help improve its position to attract more loans to tide over the crisis. While there may not be many options for the government,except for negotiating the amount,it is clear that a long-term view will have to be taken for the airline.

At present,some of the other suggested measures include:

• Reduction in productivity linked incentives (PLI)

• Return of leased aircraft,and to operate on only owned aircraft.

• Making it compulsory for government servants to fly only Air India

• Review of all AI’s operational agreements.

While this happens,salaries for the month of June have been deferred by two weeks for all middle-level and senior employees. In many ways,this move also helped draw attention to the deepening crisis in the airline — one which had prompted the government to change the Air India CMD in the middle of the Lok Sabha elections.