AI board begins talks on cost-cutting measures

The Air India (AI) board today began deliberations on crucial financial issues like bridge loans for aircraft deliveries, its plans for commercial transformation and reinventing the brand.

At the start of the two-day meet, functional directors of the National Aviation Company of India (NACIL) made presentations on their plans and strategies to reduce costs and on operations to the board, sources said.

The meeting comes in the backdrop of the government approving the grant of the first tranche of equity infusion of Rs 800 crore and asking the company to take urgent cost-reduction and revenue enhancement measures to turnaround the loss-making national carrier.

The board is understood to have taken up as many as five proposals for approval, including financial sanctions for the commercial transformation of AI, they told PTI.

The board would take up "a proposal to seek financial sanction of Rs 12.86 crore for its commercial transformation project to be undertaken as per the advise of Mckinsey (consultancy firm) and for reinventing the brand," they said.

In addition, the management would also seek the board's approval for bridge loans for aircraft deliveries this year and extension to Accenture, which is working on the merger process of erstwhile Indian Airlines and AI, for another six months, they said.

Accenture was appointed as the consultant to go into all aspects of the merger of the two state-owned carriers into one entity in 2006. NACIL has so far paid Rs 8 crore to Accenture, the sources said.

The issue of Air India joining the Star Alliance is likely to come up before the board tomorrow.

"Since the date for joining the Star Alliance stands deferred once again, AI wants to extend the time for making the payment for membership, which it is supposed to make at the time of joining the Alliance. This matter will also be placed before the board," sources said.

The airline has to pay a total of $10 million as membership fee to the elite club of global carriers. It has already paid $6 million and the remaining amount of $4 million is to be paid when it actually joins the Alliance.

The board had last met in Delhi on December 22 when it had decided to initiate a series of major steps to cut costs and enhance savings.

Air India, which recorded a loss of Rs 5,548 crore in 2008-09 compared to Rs 2,226.16 crore in 2007-08, is focusing on cutting costs by Rs 1,500 crore and increasing revenues by Rs 1,200 crore as per its turnaround plan.

The airline's turnaround plan has been broadly divided into 0-9 months, 9-18 months and 18-36 months and has been segregated under operational efficiency, product improvement, organisation building and financial restructuring.