Govt wants AI to step up cost-cutting
Air India Ltd will have to show cost-cutting on expenditure and revenue enhancement if they want financial support from the government, civil aviation secretary RN Choubey said on Wednesday.
Pradeep Singh Kharola, chairman and managing director of Air India made a presentation to the group of ministers (GoM) on Tuesday and listed 10-12 cost-cutting and revenue enhancement measures, which will lead to financial benefit of ₹2,000 crore per annum.
“The government will support the national carrier but it will have to show efficiency. We have made it clear to them that on one hand you work on efficiency improvement and then we will support you,” Choubey said.
The aviation secretary said after the disinvestment failed, the aviation ministry went back to the GoM and the common view was to wait till macroeconomic conditions become favourable.
On Tuesday, a government panel decided to sell the national carrier’s ground handling arm Air Transport Services Ltd (AIATSL) and use the proceeds to pare its massive debt burden.
AIATSL is the largest ground handling company in India and is present in almost all airports across the country where the airline operates. The company has close to 80-85% share of the domestic and international ground handling business in India.
“We are asking Air India to work on both passengers and financial health aspect. We have come to the figure of projected benefits of ₹2,000 crore per annum considering current price of crude oil. Financial support will also be on as you go basis and we will not give any amount in one go,” Choubey said.
Air India has already started the process to improve operational efficiency.
“The problem of Air India is its legacy and we are addressing it strategically. The climate is such that all airlines are losing money. Finance ministry has been very supportive and to improve the passengers’ experience, the airline need capex. We have asked Air India to prepare the details and then we will approach the finance ministry,” civil aviation minister Suresh Prabhu said.
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