Air India unveils turnaround plan

State-run carrier Air India on Friday announced revival plan as per which the airline would make a turnaround within 24 to 36 months.“Air India Flight is undertaking a turnaround programme for 36 months and focussing on low-cost carrier for high density ports from September,” said Air India Chairman Arvind Jadhav, adding, “We are planning to create a subsidiary for MRO, ground handling and cargo unit.” Explaining the reason for creating a subsidiary for MRO, ground handling and cargo unit, he said: “It would lead to almost two-thirds of the 32,000 staff going out of airline operations, thus lowering the aircraft-to-employee ratio to match global standards.”

“Ground-handling subsidiaries of Lufthansa and Singapore Airlines account for almost 40 per cent of revenue of the parent company, whereas we currently earn only two per cent,” Jadhav informed. The national carrier will not only be launching a domestic low-cost airline from mid-September, but also re-evaluating aircraft purchase and financing processes.

“Air India Express will launch its low-cost domestic operation from mid-September on 27 per cent of Air India’s existing routes, that were not profitable and ten additional aircraft would be deployed for this purpose,” said Jadhav, adding, “Air India would gradually shift 70-75 per cent of its existing domestic operations to Air India Express.” The airline is expected to earn Rs 180-200 crore through its low-cost operations on the domestic sector, which would improve its bottomline.

Global aviation industry is passing through a very difficult phase owing to recession and India is no exception. Air India, which has over the year lost its market share, is expected to lose over Rs 7,000 crore this year. The carrier is also overburdened by its working capital borrowings worth Rs 17,000 crore.

Jadhav said that the airline would have to go for cost-saving measures, which will be painful. “We have got into a cash-flow problem. We are unable to service our interest and debt liabilities with our internal resources,” Jadhav added.

Air India has made a presentation to the Government on the need for equity infusion and soft loan as the airline is facing Rs 60,000 crore debt. “We have made a presentation to the Government and it is carrying out a financial analysis. It is up to them to decide as to how much money we need,” he said. The airline also said it would go for an IPO in the next 18 months.
Source:The PioneerDate-8 August 2009Edition- New Delhihttp://dailypioneer.com/194505/Air-India-unveils-turnaround-plan.html