New Delhi: National Aviation Co. of India Ltd (Nacil), which operates Air India, has sought a Rs1,300 crore equity infusion and a Rs1,000 crore loan from the government as part of a sweeping plan to revamp the state carrier’s operations and ride out accumulated losses.
The firm proposes to cut costs by grounding flights on unprofitable routes and trim other expenses as part of the plan proposed at a meeting in Mumbai last week.
Nacil officials told the meeting, called by civil aviation minister Praful Patel, that Air India risked more than doubling its losses in the fiscal year to next March, according to a senior official present in the meeting, who asked not be identified.
Patel and other aviation ministry officials were told that the national carrier was losing Rs13-14 crore a day this fiscal year, said this official. It lost more than Rs2,144 crore in the year ended March.
Indian airlines have been piling up huge losses after jet fuel prices almost doubled in a year. Jet Airways (India) Ltd, which operates India’s biggest domestic carrier, announced a Rs650 crore loss for fiscal 2008. Deccan Aviation Ltd, which calculates its fiscal year to the end of June, lost Rs643.64 crore in the nine months to March.
Staying afloat? Air India planes at the Chattrapati Shivaji International Airport in Mumbai. ( Indranil Mukherjee / AFP)
Nacil chairman and managing director Raghu Menon, who took over the airline’s reins in April, described it as a “sink or swim situation,” the same official said. Menon said the situation was the “grimmest” the airline faced in three years, blaming it on the surge in aviation fuel prices against the backdrop of the ongoing merger with domestic carrier Indian.
Menon said the merger created “huge internal problems” as the company integrates the operations of the two airlines and their combined 33,000 workforce, the official said. Air India and Indian are merging into Nacil under a government decision made in August last year.
Besides the government cash infusion it sought, Nacil plans to take measures on its own to cut costs and reduce flab.
The airline is looking at the possible sale and lease-back of aircraft to meet working capital requirements, expected to rise from about Rs6,550 crore in the last fiscal to Rs9,550 crore in the year to next March, the official said.
Other proposed measures include the removal of travel agency commission, a 10% cut in the cost of passenger amenities and administrative expenses, and flight cuts on international and domestic routes that do not meet costs.
Nacil executive director Jitender Bhargava said no formal proposal was made to the government, but the company did discuss the subject of growing losses in the aviation industry and the steps it was taking to combat them.
The authorized capital of the airline is Rs1,500 crore with about Rs143 crore equity, he said, adding that the government, being the ultimate owner of the airline, would boost equity as required.
“It was just a discussion, we discussed the current state, factors responsible and measures to be taken,” he added about the review meeting.
Bhargava declined to comment on losses, but said several measures such as a route rationalization will be announced soon.
Flights such as the ones between Mumbai and Dar-es-Salaam and Nairobi in Africa that sometimes fly as few as half a dozen passengers, may be the first to be grounded.
Nacil was asked to send a formal proposal to the civil aviation ministry spelling out the measures it sought to boost capital, cut costs and combat losses.
The proposal will be scrutinized in detail by the ministry and then put forward to the finance ministry, said a senior civil aviation official, who also asked not to be identified.