Govt asks Finance, Petroleum Ministries to lend support to AI

This was decided at a meeting of the high-level committee, headed by Cabinet Secretary K M Chandrasekhar, set up to monitor Air India's cost cutting measures. The Committee met for the first time today and vetted the cash-strapped carrier's plans to cut costs and generate revenue.

Official sources said Air India's parent company, National Aviation Company of India Limited (NACIL) has been asked to appoint a Cost Auditor to monitor costs.

The auditor would ensure that cost reduction measures and operational efficiencies are implemented on a day-to-day basis, sources said.

The national carrier is estimated to suffer a loss of Rs 7,200 crore in the last financial year.

At the meeting, it was decided that the Finance Ministry would be asked to "critically examine the extent of assistance" that could be given to NACIL to come out of the major financial crisis it is facing, sources said.

The Petroleum Ministry would also be asked to extend the credit limit to Air India, initially for three months, they said, adding that the airline made a presentation before the high-level committee on various cost reduction and revenue generation measures it plans to take up.

After the meeting while speaking to reporters here, Air India CMD said, the "government is with us" and would give full backing to the airline on its growth and cost-saving plans.

The focus of these plans were on revenue generation, he said, adding that the airline would keep the committee updated on these plans at its meetings to be held every month from now onwards.

Air India, which has been losing an estimated Rs 250 crore a month, has chalked out a turnaround plan aimed at generating Rs 3,000 crore through internal accruals over the next six months. The plan also includes steps to mobilise additional revenue of Rs 1,800 crore through cost-cutting and savings.

The national carrier is understood to be seeking a soft loan of Rs 3,000 crore from the government, apart from equity infusion. The airline has ordered 111 aircraft at a cost of over Rs 50,000 crore but has an equity base of only Rs 145 crore.

The high-level Committee also asked NACIL to come up with a concrete cost reduction proposal, including replacing of the current Productivity Linked Incentive (PLI) with an alternative scheme, sources said. Air India's cost on employees is about Rs 5,000 crore.
Sources said such a scheme would have to be within the framework of Department of Public Enterprises guidelines.

The airline has so far borrowed Rs 16,000 crore from over 15 banks as overdraft, primarily to pay off its debt on account of fleet acquisition.

The turnaround and restructuring strategy includes a separate plan for the return of Air India's leased aircraft at the earliest. A team of senior officials are already working on the lease contracts, sources added.

The delivery schedule of the airline's fleet acquisition plan has been redrawn, they said. Air India has till date inducted 51 planes out of its 111 aircraft order.

It has also decided to close down its offices at overseas locations where it does not operate. Plans for leveraging of Air India's properties and real estate assets are also being prepared, sources said.

Heads of strategic units concerning cargo, MRO and other related businesses are putting into effect plans to determine the deliverables in the next six months, 12 months and 18 months