Broke Air India ready to pay crores to McKinsey

New Delhi: Cash-strapped Air India may be flying low these days, but the national carrier has a raft of consultants on a high as the airline management seeks expensive suggestions, which it often finds hard to implement.
This Friday, the national carrier’s board will consider a proposal to appoint McKinsey & Co as advisor to suggest ways to recover. An airline official, requesting anonymity, said the consultancy was demanding Rs 14 crore as fee for its services, mostly aimed at improving operations and joining the global air synergy, the Star Alliance.
Air India is already being advised by Booz Allen and Accenture, the latter tasked with smooth adoption of the erstwhile Indian Airlines into the Air India structure. Friday’s board meet will also look into extending Accenture’s services. The national carrier, which is struggling to pay staff salaries, doles out about Rs 25 lakh each month to Accenture, said the Air India official. Incidentally, the board members had themselves seen their performance-linked incentives being frozen as the carrier undertook a cost-cutting exercise.
Air India chairman and managing director Arvind Jadhav confirmed that the airline would place a proposal to hire the services of McKinsey before the board on Friday.
In July 2009, the company had appointed SBI Caps to suggest a road map for the financial restructuring of the airline in the short and medium term. Air India is looking at a complete transformation that includes revamp of customer interface process like reservation, airport handling, revenue management and frequent flyer programme, among others. It now plans to re-examine the choice of Frankfurt as its hub and launch of a low-cost airline in the domestic market, suggested earlier by its consultant.
07/01/10 Nirbhay Kumar/Economic times

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Categories: Foreign Jan 2010, NACIL Jan 2010