Panel to suggest cost-cutting measures for Air India

Last Updated: Thu, Jan 03, 2013 10:10 hrs

New Delhi, Jan 3 (IANS) The government Thursday formed a panel to suggest measures to cut rising operation costs of Air India after the national carrier was found to have suffered an average net loss of Rs.404 crore a month March-October last year.

The five-member committee is chaired by Ravindra H. Dholakia, professor of economics and public systems at the Indian Institute of Management (IIM), Ahmedabad. The committee is expected to submit its report within two months, the civil aviation ministry said in an official statement.

"Although the committee has been asked to submit its report in two months, it has also been asked to give immediate recommendations without waiting for the final report so that these can be implemented in Air India immediately," the ministry statement said.

"The committee will analyse various cost components and identify those expenses and costs which can be abolished immediately, or reduced in phases or curtailed after some time in future," it added.

An important task of the panel will be to review expenses over overseas offices, including the manpower deployment and jet fuel utilisation.

The development comes after an audit of the airline's books Dec 20, 2012, showed that the company had a cash inflow of Rs.1,348 crore per month, while the outflow due to high fuel cost was Rs.1,752 crore, leading to the cash deficit.

The move is also critical as under the year wise financial projections given in the financial restructuring plan (FRP) approved by the cabinet on April 12, 2012, the airline is supposed to be EBITDA (earnings before interest, taxes, depreciation, and amortization) positive and not in any cash deficit position till March 31, 2013.

Air India currently has borrowed some Rs.21,412 crore towards acquisition of new aircraft, another Rs.22,368 crore towards working capital and owes around Rs.2,000 crore to oil retailers, besides facing accumulated losses worth Rs.22,000 crore.

The government has reiterated that it will not infinitely support Air India with tax-payers' money if it does not perform as per the turnaround plan (TAP) and FRP.

The TAP and FRP which were prepared by the Air India management in consultation with the State Bank of India's (SBI) advisory arm SBI Caps and vetted by consultancy firm Deloitte includes equity for cash deficit support of Rs.4,552 crore till fiscal 2021.

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