Deloitte tells AI to freeze pay, promotion for 3 yrs

To turn around ailing Air India, financial advisory firm Deloitte has suggested a series of measures, including a freeze on any increase in pay or promotion of its 31,000 employees for the next three years. The airline has an annual wage bill of Rs 3,100 crore and the report has said as many as 2,600 employees will retire during the period of freeze.

It has also recommended the company cut spending on aviation turbine fuel by Rs 300 crore yearly, by negotiating more aggresively with suppliers for domestic routes.

In the next board meeting, on January 19, the board of directors is likely to discuss some of the Deloitte suggestions. The company was hired to vet the airline’s financial plans.

AI’s annual interest payment is around Rs 1,800 crore on debt of Rs 40,000 crore (Rs 19,000 crore is high-cost working capital debt) and has accumulated losses of Rs 15,000 crore. The carrier lost Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, and Rs 5,551 crore in 2009-10.

The government carrier had earlier said a way to cut fuel costs would be to take ATF suppliers from the private sector, which offer better volume discounts. Currently, most of AI’s fuel is taken from the state-owned oil corporations in India. Its annual fuel bill is Rs 4,000 crore.

State-run oil companies, to which the carrier , have already refused the airline credit from December 13, forcing it to pay them around Rs 12.5 crore daily for the fuel it requires for national and international flights.
 

WHAT’S AILING THE MAHARAJA

* The airlines has an annual wage bill of Rs 3,100 crore; report says 2,600 employees will retire during the period of freeze

* Annual interest payment is around Rs 1,800 crore on debt of Rs 40,000 crore (Rs 19,000 crore is high-cost working capital debt)

* Has accumulated losses of Rs 15,000 crore — lost Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, and Rs 5,551 crore in 2009-10

* Annual fuel bill is Rs 4,000 crore

* Owes around Rs 2,300 crore to state-owned oil corporations; has been asked to pay them around Rs 12.5 crore daily

* Owes Rs 600 crore to the Airports Authority of India

“The airline will be negotiating with private oil companies like Reliance and Essar on a discount and will be able to save Rs 300 crore per year through this,” said a source.

AI also owes Rs 600 crore to the Airports Authority of India.

The airline has also asked for another equity infusion, of Rs 2,000 crore, from the government in the current financial year. The government gave it a Rs 1,200 crore infusion recently and Rs 800 crore in 2009-10, taking the equity base to Rs 2,145 crore.