Air India running out of cash
15 / 06 / 2009
AIR India’s shaky finances have forced it to delay paying staff salaries for two weeks and sent it begging for a handout from the government.
Company spokesman, Jitender Bhargava, said that the airline’s 31,000 staff will be paid on 15 July instead of at the start of the month as the carrier runs out of cash.
Estimates suggest that the national carrier lost US$800 million in the last financial year forcing it to try and save $600 million and to ask the Indian government for $2.9 billion to see it through the economic downturn.
It had already asked for $833 million in February but the finance ministry and department of public enterprises demanded that parent company, National Aviation Company of India Limited (NACIL), draw up both a plan to cut costs and viable five-year business model.
According to Kapil Kaul, chief executive officer of the India unit of the Centre for Asia Pacific Aviation this hasn’t happened. “The national carrier is facing perhaps its toughest ever crisis. Air India doesn’t have a viable business plan, and it can never be viable with more than 30,000 people.”
In the mean time, civil aviation minister, Praful Patel, has confirmed that the government will help. “I think it will happen because as the owner of the airline, the government has its responsibility to put in equity, like private airlines where their promoters put in money.”
However, when asked if the company would receive the full amount, Patel said: “No…the number is far less than that.”
NACIL, the product of a merger between Indian Airlines and the state-owned Air India in 2007, has ordered $9.2 billion-worth of aircraft from Airbus and Boeing.
Kaul believes that much of the company’s problems stem from the merger, which he says was “mishandled”. In a report in May he wrote: “This marriage between the international and domestic state-owned carriers made perfect sense on paper, but has been let down by poor execution.” He added that only by reducing workers and by being privatised can it be turned around.