AI to have more low-cost flights on Gulf routes

In a bid to cut costs, Air India has decided to convert some flights of the erstwhile Indian Airlines on Gulf sector routes into low-cost ones through Air India Express.

In its proposal to the government, the airline has said this move — which will cut down duplication of flights on some routes where both AI and IA continue to fly — would also result in annual savings of Rs 113 crore. Besides, as many as 664 new seats would be added on the sector because of reconfiguration of aircraft to the low-cost model.

Official sources confirmed this move by the airline, saying this is part of a massive exercise Air India has undertaken to cut costs. It comes just before a November 12 meeting of the Group of Ministers, which will examine AI’s request for infusion of Rs 5,000 crore equity in the context of the airline having taken substantial cost-cutting measures.

Meanwhile, a decision to cut employee salaries by about 15% is likely by early next week. “Employees need to face the reality. Yes, the earlier 50% cut which was opposed by employees was unwarranted, but 15% is reasonable. We will not be approaching the unions again on the issue and directly go to the GoM with this measure. A cut in salaries would automatically mean a reduction in performance-linked bonus (PLI) across the
board.

Also, the decision to cut full-service flights on the Gulf routes would further bring down the PLI component,” highly placed sources told DNA Money on Friday.

Even some high-profile routes — including the non-stop Delhi-New York and Mumbai-New York flights — could be tweaked or even cancelled in the coming days as a part of this cost cutting exercise. These two flights are together running up annual losses of Rs800 crore!

Air India, which is running up losses of Rs400 crore a month, has sought Rs5,000 crore as equity support from the government because its current equity base of Rs145 crore is quite small. The carrier is hoping to be able to raise further loans on the base of the enhanced equity and thus fund an ambitious aircraft purchase programme. Unable to bear continued losses, the airline has already sought Rs3,000 crore as additional working capital loans and Rs500 crore has been sanctioned as a short-term measure.