Govt wants finance, petroleum ministries to help revive AI

New Delhi, July 25 (PTI) Coming to the aid of cash-
strapped Air India, the Indian government Saturday asked the
finance ministry to examine the extent of a financial bailout
for the airline, and also asked the petroleum ministry to
extend the credit limit on jet fuel for at least three more
months.

This was decided at the first meeting of a high-level
committee headed by Cabinet Secretary K M Chandrasekhar, which
vetted the ailing carrier's plans to cut costs and generate
revenue as also its fleet renewal plans to meet intense
competition in both domestic and international arena.

Air India is estimated to lose around Rs 7,200 crore in
2008-09. It has a working capital borrowing of about Rs 17,000
crore primarily to pay off its debt on account of fleet
acquisition.

In this backdrop, Air India is understood to have made a
case before the Committee of Secretaries (CoS) for fresh
equity infusion by the government and a soft loan of Rs 3,000
crore. The airline has placed orders for 111 new planes worth
over Rs 50,000 crore against a minuscule Rs 145 crore worth of
paid-up capital.

A presentation on Air India's financial health and its
financial restructuring plan was made before the CoS by the
Civil Aviation Ministry and SBI Caps.

The CoS met weeks after India's Prime Minister Manmohan
Singh assured the airline that the government would put its
entire weight behind it and asked it to take steps for a
turnaround from the present financial mess.

The CoS, which also comprises Principal Secretary to the
Prime Minister T K A Nair, Finance Secretary Ashok Chawla and
Civil Aviation Secretary M Madhavan Nambiar, maintained that
any assistance from the government would have to be matched
by an "aggressive" cost reduction and a better revenue
management by Air India's parent company NACIL.

After the meeting, Air India CMD said the "government is
with us" and would give full backing to the airline on its
growth and cost-saving plans.

The focus of these plans were on revenue generation, he
said, adding, the airline would keep the committee updated on
these plans at its meetings to be held every month from now
onwards.

In its presentation on its cost-cut and savings strategy,
Air India covered various aspects like cost reduction,
operational efficiencies, revenue generation and the need for
financial restructuring.

After reviewing the strategy covering long, short and
medium term measures, the CoS asked the Finance Ministry to
"critically examine the extent of assistance to be given to
NACIL," an official spokesperson said.

It also asked the petroleum ministry to extend the credit
limit to NACIL on the purchase of jet fuel by Air India "for
three months initially".

The CoS also asked Air India to come up with a concrete
cost reduction proposal, including replacement of the current
productivity linked incentive (PLI) given to a majority of
employees by an alternative scheme within the framework of the
Department of Public Enterprises' guidelines.

It asked NACIL to appoint a cost auditor to monitor costs
and ensure that cost reduction measures and operational
efficiencies were implemented on a day-to-day basis.

Air India, which is losing an estimated Rs 250 crore a
month, has chalked out a turnaround plan aimed at generating
Rs 3,000 crore through internal accruals over the next six
months. The plan also includes steps to mobilise additional
revenue of Rs 1,800 crore through cost-cutting and savings.

It also includes a separate plan for the return of Air
India's leased aircraft at the earliest. A team of senior
officials are already working on the lease contracts.

The delivery schedule of the airline's fleet acquisition
plan has been redrawn, they said. Air India has till date
inducted 51 planes out of its 111 aircraft order.

It is also closing down its offices at overseas locations
where it does not operate. Plans for leveraging its properties
and real estate assets are also being prepared.

Heads of strategic units like cargo, MRO and other
related businesses were putting into effect plans to determine
the deliverables in the next six months, 12 months and 18
months. PTI ARC
rai
NNNN