Air India seeks Rs5,000 crore equity, promises to cut fleet-size

Air India is seeking an additional equity of Rs 5,000 crore from the government as it promises to squeeze its fleet size and reduce the wage bill of its 31,000-strong workforce.
The national carrier has suggested that the government should inject Rs5,000 crore of equity over a period of three years from this fiscal, besides providing guarantee for low-cost working capital loans from banks, official sources said here.

The airline, which is starved of cash, has sought Rs2,400 crore by the end of March next year, they said, adding that the carrier would need Rs 3,000 crore every three years to meet its expenditure obligations.

In a proposal presented to the Group of ministers last week, the airline said it could cut down the fleet-size from the present 146 aircraft to 95 over the next two years by introducing new planes to replace the aged and leased ones.

The GoM, which met under the chairmanship of finance minister Pranab Mukherjee, made it clear to the ailing national carrier that any assistance by the government should be matched by the airline through cost-cutting and revenue enhancement measures.

In a presentation to the GoM on its restructuring and turnaround programme, AI CMD Arvind Jadhav said the carrier would reduce costs by about Rs3,000 crore and enhance revenues by Rs2,000 crore annually. The cash-strapped carrier, which is estimated to post losses to the tune of Rs 7,200 crore this fiscal, has proposed several measures to rationalise manpower costs.

While it has spent Rs 839 crore in the first quarter of the current financial year, it has projected spending the same amount in the second quarter and cap it at Rs650 crore each in the last two quarters, the sources said.

Among the steps initiated by the carrier is the introduction of leave without pay scheme, reduction in overtime and rationalisation of contractual and casual employees. Regarding "right-sizing" of its fleet, the sources said Air India was planning to sell off its three Boeing 777-400s after the Haj operations, two Airbus A-310 cargo planes next month and lease up to three Boeing 777-200 (LRs) and up to four A-310 cargo aircraft.

It also plans to finalise the sale of five Boeing 737-200s and four A-320s by early next year, the sources said. All these moves are part of the overall plan to make the fleet trim and packed with newly-inducted aircraft, they added.