Recent events indicate that Air India, like many other players in the global aviation industry, is surviving on a wing and a prayer.
Recent events indicate that Air India, like many other players in the global aviation industry, is surviving on a wing and a prayer.
The company is losing Rs14-15 crore a day, top officials of the national carrier confirm. No wonder then, that the airline doesn’t have the money to pay salaries to its employees that number around 30,000. For the first time in the airline’s history, it has delayed salaries of its junior staff and has asked senior executives to forego their June pay and incentives to tide over the liquidity crunch in the short term.
Desperate times call for urgent measures. The airline’s top management has gone into a huddle along with officials of the civil aviation ministry and the prime minister’s office (PMO), and a firm proposal for revival is likely to be out by the month-end. There is talk that Rs12,000-14,000 crore may be infused into AI.
Sources say AI’s losses this fiscal may be well over Rs5,000 crore. Of the current working capital limit of Rs16,000 crore, Rs15,200 crore has been exhausted. Of the remaining Rs800 crore, the airline has outstanding commitments of Rs1,400 crore towards salaries, vendors, Airports Authority of India, other airport operators and fuel.
But AI didn’t reach the end of its financial tether in a day; its finances have been precarious for a while.
Multiple factors account for this distress. Foremost is the global downturn, which caused a drastic fall in passenger traffic. This, coupled with an ill-timed expansion plan through a massive fleet acquisition, dealt a major blow to the airline.
Other lingering issues, such as inability to rationalise routes and introduce efficiencies, as well as the failure to tackle the highly sensitive issue of rationalising manpower, only compounded the problem.
As for its seemingly ill-timed capacity expansion, officials say the plan to purchase 111 aircraft was formulated last year when the airline industry was still not aware of impending doom. The airline seeks to buy 18 carriers for AI Express, besides replacing older planes and those for which current lease has expired.
While the reasons for such a huge order appear valid, this scale of aircraft shopping would come at a cost of Rs45,000 crore, a tall order for any airline and more so for AI which has an insignificant equity base of Rs145 crore. Some aviation experts also blame the decision to merge the erstwhile Indian Airlines with AI for the present state of affairs.
There are indications that chairman and managing director Arvind Jadhav is considering postponement of the delivery of some aircraft and doing away with performance-linked bonuses for employees. Of the Rs4,000 crore annual salary bill, about Rs 1,400 crore go towards such payout.
Also, manpower rationalisation may be on the agenda with Jadhav drawing the attention of employees to the fact that “Air India has not resorted to retrenchment or layoffs of staff till date”. He conveyed this to employees in a communication on Saturday.
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