New Delhi, July 25 (Inditop.com) The government has asked the beleaguered national carrier Air India to drastically cut costs and manage revenues better if it expects any financial assistance to stay afloat, while the finance ministry examines the extent of funding required.
“Any assistance from the government would have to be matched by an aggressive cost reduction and a better revenue management,” an official statement said Saturday after a committee of secretaries examined options before the government to help the turnaround of National Aviation Co of India that runs Air India.
The carrier is in a financial mess with losses expected to have topped Rs.5,000 crore ($1 billion) last fiscal, forcing Civil Aviation Minister Praful Patel to seek a Rs.10,000-crore (about $2-billion) bailout package for the beleaguered carrier from Prime Minister Manmohan Singh.
“The ministry of petroleum was asked to extend the credit limits to Air India for three months initially,” said the statement, referring to the dues of the national carrier to petroleum retailing companies toward aviation turbine fuel.
Air India has also been asked to come up with a concrete cost reduction proposal and replace, among other things, the controversial productivity-linked incentive scheme with another salary pay out plan.
The meeting, chaired by Cabinet Secretary K.M. Chandrasekhar, also reviewed the progress made in Air India’s turnaround based on the directions given at a high-powered meeting presided over by Prime Minister Manmohan Singh.
It also went through a detailed presentation on operational efficiency prepared by SBI Caps, the financial restructuring and stock market services arm of State Bank of India (SBI).
Patel had Wednesday said the government cannot help the cash-strapped national carrier “beyond a point” and asked it to change its work culture. He had also promised to recast the board of Air India in a month.
Air India is raising a $1-billion loan from overseas to fund its fleet expansion programme. The 11-year loan is expected to be guaranteed by the US Export-Import Bank.
The committee of secretaries took note of the fleet renewal plans of the airline that was necessary in view of the intense competition it faces in the market.
