AI to reduce fleet 28% as condition of government bailout

The Indian government yesterday announced final approval of an INR8 billion ($173.7 million) equity infusion into Air India parent National Aviation Co. of India, with the release of the funds "calibrated to the achievement of milestones laid down by the [cabinet]" including a 28% fleet reduction.
The government said the equity "would not only ease the cash flow situation of the company but would also preclude borrowings from the markets at a high cost." AI lost INR14.74 billion in its fiscal third quarter ended Dec. 31 (ATWOnline, Jan. 28) and "is currently facing severe financial losses. . . compounded by its costly legacy assets, weakening revenue stream and high cost structure." It said AI's operating loss through the fiscal first half was INR2.03 billion. The government said the airline has agreed to a INR19.11 billion cost reduction program for the year ending March 31.
In addition, it will reduce its fleet from 146 aircraft to 105 by March 2011. Twenty-two already have been pegged for departure through lease, sale or their return to a lessor, which will result in annual savings of INR2 billion in maintenance and inventory costs, INR4 billion in fuel costs and "efficiency gains" and INR3 billion in employment expenses. Additional manpower reductions will save INR1.13 billion.
19/02/10 Brian Straus/ATW Online

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Categories: NACIL Feb 2010