Air India may go low cost on domestic routes
25 June 2009
New Delhi: Air India (domestic) may turn to the low cost model to keep itself afloat. This is certainly one of the options being actively considered to turn around the airline, even as the process to restructure this public sector behemoth gets under way.
Yesterday, PM Manmohan Singh apparently spent some 90 minutes with aviation ministry officials looking into the problems affecting the flag carrier, which has been merged with domestic state-owned carrier Indian Airlines. The struggling giant is now finding it difficult to pay staff salaries on time.
Also yesterday, soon after the civil aviation minister's meeting with the prime minister, it was announced that a four-member committee of secretaries would look into the airlines request for a bailout package as well as its restructuring. The committee will be headed by the cabinet secretary and comprise of the finance, aviation secretaries and principal secretary to the PM.
"AI's restructuring plan along with the request for equity infusion-cum-loan has to be submitted to them within a month. Unless a series of measures are taken to improve the airline, it will not be possible for the government to keep supporting in unconditionally. This is one last chance Air India has got," Patel said.
"Indian carriers will have to redefine their business models. If someone has a capacity that can't be supported by a full service model, what choice does he have?" Patel said.
The committee of secretaries will review the airline's performance every month and will also monitor if the merged Air India (domestic and international) is keeping the promises it has made to avail of a bailout package.
"The management will be restructured within a month. Eminent people will be brought on the airline's board, including functional directors. Induction of new aircraft into the fleet will not be slowed down as Air India will phase out its old aircraft," Patel said.
The airline has lost about Rs5,000 crore in 2008-09 and now has accumulated losses of Rs7,200 crore. It is also slated to fund the purchase of 111 aircraft costing Rs48,000 crore.