Govt asks AI to save Rs 2,000 cr by March

The government will infuse equity into Air India by March, but only if the ailing state-run carrier manages to generate another Rs 2,000 crore by increasing revenue and cutting costs.

“We have set parameters and will monitor the airline on a monthly basis. The airline will have to perform and prove itself (by) revenue enhancement and a cost-cutting programme to the extent of at least Rs 2,000 crore,” Union civil aviation minister Praful Patel said today after a meeting of the Group of Ministers (GoM) on the subject.

AI Chairman and Managing Director Arvind Jadhav gave a presentation to the GoM headed by Finance Minister Pranab Mukherjee. It also comprises Patel, petroleum minister Murli Deora, home minister P Chidambaram and Planning Commission deputy chairman Montek Singh Ahluwalia.

The meeting was also attended by aviation secretary M M Nambiar and joint secretary and financial advisor E K Bharat Bhushan.

Patel appealed to AI’s employees to put their best foot forward in turning the airline around. “This is a time of challenge. Everybody should contribute to the turnaround,” said the minister.

AI has reported a net loss of Rs 5,548.3 crore for 2008-09 (it was Rs 7,000 crore the year before) and is seeking an equity infusion of Rs 5,000 crore. The airline has a debt of Rs 15,000 crore, of which Rs 11,000 crore is high-cost borrowing.

The carrier’s previous attempts to reduce cost by cutting its Productivity-Linked Incentive pay have not yielded any results. When it first announced a 50 per cent cut in the PLI of its 31,000 employees, the employee unions resisted successfully. The airline’s wage bill is of Rs 3,100 crore and PLI constitutes 40 per cent of it.

The second time, AI announced a PLI cut in the range of 25-50 per cent of its 7,000 executive class employees. This was opposed by around 400 executive pilots, who stopped reporting to duty. The pilots are again threatening to go on strike from November 24, if all their dues aren’t cleared.