Hyderabad: Ailing national carrier Air India has engaged management consultancy Booz and Co. to help it hive off its non-core businesses, but rejected a financial restructuring plan by investment bank NM Rothschild and Sons Ltd.
The airline, run by state-owned National Aviation Co. of India Ltd (Nacil), also put on hold an employee training plan proposed by consultancy firm McKinsey and Co, two civil aviation ministry officials familiar with the matter said.
Air India chairman and managing director Arvind Jadhav confirmed the developments without giving reasons.
“The condition of engaging Booz was linked to conditions such as revising the consulting fee and government releasing funds towards equity infusion,” Jadhav told Mint on Wednesday on the sidelines of Indian Aviation 2010 international conference.
Mint could not immediately contact Booz, Rothschild or McKinsey for the story.
Nacil was in talks with the three firms for advice on financial restructuring and turnaround. It had said it needed different advisers for different roles.
Air India, which suffered a loss of Rs5,548 crore in 2008-09 and runs up a monthly cash deficit of Rs400 crore, is seeking Rs5,000 crore from the government to boost its debt-raising capacity. Its current equity base is Rs145 crore. The equity infusion is linked to effective cost-cutting by the airline.
Booz had suggested at least 70 cost-cutting and revenue-enhancement measures to Air India, which it said could generate up to Rs5,000 crore over 18 months, as Mint reported on 18 November. But Air India had later issued an ultimatum to Booz to lower its fee.
Jadhav said Booz agreed to lower the fee, but didn’t divulge more details.
He added Air India has put on the back burner McKinsey’s proposal for a training programme to reorient employees towards passengers.
“The future course of action and restructuring will be decided after (the) cabinet reviewing the current conditions,” Jadhav said.
A senior civil aviation ministry official said Air India has to find its own way out of the crisis as it has exhausted its working capital drawing limit of Rs18,000 crore.
“Hiring consultants could be one way. But it cannot add to your cost,” he said.
For operational restructuring, Air India has hired three other foreign firms—US-based aviation consultant Simat Helliesen and Eichner Inc, Flugwerkzeuge Aviation Software GmbH of Austria, and Texas-based technology company Sabre Holding Corp.—to help redraw its flight network and save fuel costs.
It also continues to pay Accenture for overseeing the integration of Air India and Indian Airlines, which were merged to form Nacil.