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Severe austerity measures in the offing for Air India as it sinks deeper

Air India’s CMD has said that the airline will have to generate revenues in every possible manner to stay afloat

Severe austerity measures in the offing for Air India as it sinks deeper
Severe austerity measures in the offing for Air India as it sinks deeper

New Delhi: For India’s national carrier, Air India, severe austerity measures may be in the offing as the airline moves to curtail unnecessary expenses and trim the fat in order to turn around its business. In a message in the October issue of Air India’s in-house magazine, Samvaad, Chairman and Managing Director Pradeep Singh Kharola has said that the airline will have to generate revenues in every possible manner to stay afloat. The efforts to revive Air India have become more difficult with the overall increase in operational expenditure and fierce competition.

Soaring fuel prices pose a big challenge

“Our path towards turnaround has become more difficult with the... market throwing fresh challenges by way of rising fuel costs, a volatile currency and overall increase in operational expenditure, besides, of course, fierce competition,” Kharola has told the company’s employees in the magazine.

Rising oil prices have been increasingly hurting the airline industry the world over because fuel costs account for a major chunk of the operational costs. Last week, the government cut the excise duty on jet fuel to 11 percent from 14 percent.

System reboot in the offing

While noting that the system of working needs to be reset, Kharola said that airlines across the world are going all out to cut expenses and improve efficiency. He added that the time is critical for Air India and the system of working has to be reset by trimming all unnecessary frills to improve the bottom line “otherwise our survival will be at stake.”

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“We are also going through a critical fiscal situation and it is imperative for us to rationalise expenditure and optimally utilise available resources. We will have to tighten our belt adopting strong fiscal discipline and streamlining of our functioning without compromising on our operational efficiency,” Kharola said.

“We have to now stand on our own feet and learn to be self-reliant,” he added.

A bailout in the pipeline

The government is working on finalising a turnaround plan (TAP) for Air India that will include a transfer of the national carrier’s working capital debt of Rs 30,000 crore and non-core assets to a special purpose vehicle (SPV), as well as an additional Rs 2,056 crore capital support in FY19. The plan is expected to be announced next month.

The national carrier has a debt burden of more than Rs 50,000 crore. Earlier this year, the plan to disinvest Air India failed to take off after it found no bidder.

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