AI to get Rs5,000 cr from govt, to cut costs by Rs3,000 cr

AI to get Rs5,000 cr from govt, to cut costs by Rs3,000 cr
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First Published: Wed, Oct 14 2009. 07 14 PM IST
Updated: Wed, Oct 14 2009. 07 14 PM IST
Mumbai: The government has agreed to infuse Rs5,000 crore ($1.1 billion) in a phased manner into Air India if the ailing state-run carrier cuts costs and enhances revenue, Union civil aviation minister Praful Patel said on Wednesday.
Air India has to cut costs by Rs3,000 crore, and raise revenue by Rs2,000 crore in the next two years, Praful Patel said.
“One step would be induction of equity and the other restructuring high cost debt to low cost debt,” he told reporters here after holding separate meetings with Air India employees’ unions and the management.
A draft note on equity infusion in Air India, prepared by the civil aviation ministry, is being sent to Cabinet Committee on Economic Affairs (CCEA), Patel said.
He said a series of measures to cut costs and enhance revenues would include returning leased planes and leasing out some new ones.
Air India, which is faced with losses estimated at over Rs7,200 crore, has undertaken a major revamp plan parts of which have already come into effect, Patel said.
“Air traffic has improved over the last six months and overall market scenario has definitely witnessed a slight improvement in the last month or two and that does send out a signal of cautious optimism that aviation industry would lead to a road to recovery though it may not be as thick as we witnessed a few years ago,” he said.
Maintaining that the government would come to the aid of Air India only if it cut costs drastically and increased revenue, the minister said the airline was “broadly looking at about Rs3,000 crore annual reduction in costs and approximately Rs2,000 crore enhancement in revenues.”
This, he said, would lead Air India to “the path of recovery in a couple of years.”
Patel said the airline has decided to defer delivery of six Boeing 777 aircraft by two years. The national carrier is also in the process of retiring its large fleet of leased aircraft in the next 12-24 months.
“The issue of certain newer aircraft being leased out is also being explored by the management, especially a few Boeing 777 (Long Range) which are, at the moment, likely to be inducted in the next few months,” Patel said, indicating that the airline would go in for sale and lease-back policy, which is being pursued by its private competitors.
Describing his meeting with representatives of 14 Air India staff unions as positive, Patel said, “the unions were very understanding and are aware of the problems.”
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First Published: Wed, Oct 14 2009. 07 14 PM IST
More Topics: Air India | Airlines | Aviation | Praful Patel | Equity |