The government has asked the National Aviation Company of India Ltd (Nacil) to present a restructuring plan for Air India (A-I) which would include infusion of equity, a possible voluntary retirement scheme (VRS) to reduce employees (31,000 strong), independent directors on the board and a rejig of top management to get the ailing state airline out of its mess.
The plan would also include substantial reduction of costs and a time-bound implementation of the integration — both of manpower and the IT system — between Indian Airlines and Air India, which has already been delayed for months.
The A-I management has been asked to prepare the restructuring plan within 30 days and present it before a committee of secretaries headed by the cabinet secretary.
Aviation minister Praful Patel today met Prime Minister Manmohan Singh, together with Nacil chairman Arvind Jadhav and civil aviation secretary M Madhavan Nambiar and made a presentation. The ministry has also pushed for reduction of sales tax on aviation turbine fuel (ATF), which constitutes nearly 40 per cent of an airline’s operating cost.
Patel later in a press conference said the PM assured full support of the government, but with the condition that the airline also has to take simultaneous measures to combat its financial mess.
“The government will not let the company go down and is committed to see it does not go sick but that does not mean it will give them an open- ended cheque. The company has to become leaner, trim their manpower , the top management will be restructured and independent directors will be appointed,” said Patel He also appealed to employees not to go on a strike because of a 15-day delay in payment of their salaries, as that would worsen the situation.
Giving some examples of the flab and the distorted emolument structures, Patel said AI has over 1,000 employees working in its canteen services. He also said a technician gets a salary of Rs 50,000 a month but Rs 1.3 lakh as performance-based incentive payment.
The minister said a notification permitting government servants to fly private airlines might be scrapped.
Jadhav will be meeting the AI unions tomorrow to give a detailed accounting of the meeting with the PM.
The unions squarely blamed Patel for the AI mess. Says Dinkar Shetty, president of the Air Corporation Employees Union, which represents 80 per cent of the staff: “We had opposed the merger (of AI with IA), saying it would raise many manpower and industrial relations issues, but Patel pushed it, saying it will help in saving over Rs 600 crore. He has not kept his promise and is more keen to support private airlines.”
Shetty added that Patel should get the trimmed the number of general manager and executive director posts, which shot up after the merger.
Patel, however, made it clear that there would not be any delay in AI’s plan to acquire 111 new aircraft for Rs 50,000 crore, which would be used to replace older aircraft. The company has already taken delivery of over 48 planes.
Patel said with an equity capital of only Rs 140 crore, the carrier will require a fresh infusion of equity, as otherwise it would not be able to fund such a large aircraft acquisition program (which includes raising more loans to buy these).
When asked why the company was continuing with its acquisition of aircraft when most others were delaying or cancelling orders, Patel said these new wide-bodied aircraft would lead to major savings in fuel.
The AI management has already set up a four-member committee with the mandate to reduce the company’s wage bill by 16 per cent or Rs 500 crore. AI’s total wage bill is around Rs 3,500 crore a year. With losses of over Rs 4,000 crore, Nacil has been losing market share in the domestic as well as the international skies.
Its domestic passenger market share fell to 17.1 per cent, much below Kingfisher (26.7 per cent) or Jet Airways-Jet Lite (25.1 per cent). In the international space, AI’s share of capacity from India is only 23.5 per cent. Worse, its passenger load factor in the domestic market at 57 per cent (March) is much lower than most competing carriers.
