Tough love for Air India
12 / 07 / 2009
AIR India’s financial woes have necessitated drastic plans to turn its fortunes around. According to the civil aviation minister, Praful Patel, the loss was largely due to high operating expenses, which have been compounded due to the present economic recession resulting in drop of passengers, high oil prices last year and servicing of debt on account.
India’s national carrier more than doubled its debt to Rs 152.41 billion (US$3 billion) in June from Rs 65.5 billion ($1.33 billion) in November 2007. It is likely to post losses of Rs 53 billion ($1 billion) this financial year and it has working capital borrowings of Rs 165 billion ($3.35 billion). Having already gone to the government once last October – where it asked for Rs 39.81 billion rupees ($820 million) – it has returned, but this time the government has stipulated more stringent requirements for its help.
While the prime minister, Manmohan Singh, gave his “fullest support” to the carrier he also said that it should immediately restructure itself by overhauling its top management and cutting costs to “leaner and trimmer organisation”.
Patel told Air India to submit a detailed restructuring plan within a month. “Nacil [National Aviation Co. of India Ltd] has been advised to formulate a concrete proposal for equity infusion and provision of soft loans,” he said.
A ‘turnaround committee’, comprising representatives of the management and unions, has already met and suggested various initiatives for the plan.
Discussions apparently centred around the special business units (SBUs) of ground-handling, engineering services and cargo, which the committee felt had unexploited business potential. Also, various cost-cutting measures notably to need to improve “defined work methods which could lead to substantial cost reductions”.
There was also discussion on how to integrate Air India and Indian more fully.
Of immediate affect will be the appointment of seven new directors, including chief executive officer and chief operating officer, either from India, but in all likelihood, from abroad.
For the full story see the next issue of Air Cargo News.