Will financial rejig help Air India?

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Will financial rejig help Air India?

For those who think Air India (AI) is on the road to recovery after its lenders have agreed to restructure loans, then think twice. The carrier needs to put its house in order, only then financial rejig can be of any good, say its top executives.

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Shaheen Mansuri

For those who think Air India (AI) is on the road to recovery after its lenders have agreed to restructure loans, then think twice. The carrier needs to put its house in order, only then financial rejig can be of any good, say its top executives.

Despite banks restructuring Rs 18,000 crore debt and infusing Rs 2,200 crore equity into the airline this year, it will have a negligible impact on the carrier, AI's higher rung officials told moneycontrol.com.

Also read: Air India to offer NCDs at 8.5%, banks clear restructuring

So what should AI do before it gets a financial boost from banks? Moneycontrol spoke to a few AI officials, who suggested the following:

Cut down flab
With over 31,000 employees on its rolls, AI has an annual salary bill of around Rs 3,500 crore, which is almost 50% more then what Jet Airways pays to its 10,000-odd employees. Jet has a similar route network to that of AI.

Attain operational efficiencies
With an employee-to-aircraft ratio of 236:1, AI qualifies to be the only airline with the highest number of employees deployed on each aircraft at a time when world over the ratio does not exceed  100:1.

Reduce aircraft fleet
Of the 148 aircraft the airline has in its fleet, around 80 are above 20 years in age and are fuel guzzlers. The airline immediately needs to get rid of older aircraft.

Re-think on aircraft orders
The airline had in 2005 placed aircraft orders with Airbus and Boeing for 111 planes valued at Rs 45,000 crore. The airline first has to cut down excess capacity and then re-think on its order size, which has been a controversial issue for quite some time. Of the total orders, it has already received 68 aircraft which are deployed on short haul routes with passenger load factors below industry standards.

Hive off cargo, engineering depts into for-profit centres
It also needs to hive off its cargo and engineering departments into separate subsidiaries which will make these business divisions eligible to take up works from other airlines also. AI's CMD Arvind Jadhav had three years ago, while announcing the turn around plan, said that he will hive off these units into separate entities which will help the firm generate additional revenues of alteast Rs 3,000 crore each year.

shaheen.mansuri@network18online.com