Air India gets PM’s promise of help but told to tone up

“Air India will have to go for massive cost reduction and increase revenues in both the short term and long term,” Civil Aviation Minister Praful Patel said after a two-hour meeting with Manmohan Singh,at which top ministry officials and AI’s newly-appointed CMD Arvind Jadhav were also present.

“There is excess flab on the entire body of Air India,not only of manpower but due to salaries and the internal functioning style,” Patel said. “The airline will have to improve its on-time performance,aircraft engineering,commercial operations,especially in the face of competition and choice (available to customers).”

Independent directors will be inducted on AI’s board,and the top management of its business units will be recast,the minister said. “The management restructuring will be completed within a month,” he said,adding,“The complete turnaround of the airline may take around two years.”

AI has been given a month to submit a restructuring plan to a new four-member bailout committee comprising Cabinet Secretary KM Chandrasekhar,Principal Secretary to the PM TKA Nair,Finance Secretary Ashok Chawla and Civil Aviation Secretary M Nambiar. The committee will review AI’s performance every month.

The carrier — sunk under accumulated losses of Rs 7,200 crore and a financial outstanding of Rs 30,000 crore till May 2009,and staring at a loss of around Rs 5,000 crore for 2008-’09 — had submitted a highly ambitious bailout wishlist to the government,seeking an equity infusion of Rs 5,000 crore,a grant of Rs 2,000 crore,and a soft loan of Rs 7,000 crore. It had also asked for a review of sixth freedom rights and capacity freezes on foreign carriers,and curbs on domestic airlines.

Patel dismissed suggestions that AI’s Rs-44,000 crore aircraft acquisition plan could be wrecking its finances. “These are two different issues,” he said. “Debt (for aircraft acquisition) is a long term issue. Deferring or rescheduling aircraft deliveries would not help (the airline) at all.”

On fixing responsibility for the crisis,Patel said: “Nobody is accountable. It is a combination of factors. Air India people have not risen to the occasion.” He also cited increases in fuel prices,fall in traffic,lower yields at low fares and the price-sensitive nature of the Indian market as reasons.

Patel was impatient with threats of a strike by AI employee unions. “Let them go on strike. They will hasten their own demise,” he warned.

The unions have threatened to strike work from June 30. CMD Jadhav will meet them in Mumbai on tomorrow.