Air India's cost cuts falling short

New Delhi: The group of ministers (GoM) which met on Wednesday to discuss the fate of Air India has taken a dim view of the carrier’s cost cutting and revenue enhancement measures till date.
Not only has the GoM not considered the airline’s demand for a further infusion of Rs 1,200 crore as fresh equity next fiscal, it has prescribed “tough decisions” for the airline management before any further financial assistance can be given.
Against a target of Rs 2,000 crore savings by March 2010, Air India has only shown savings of Rs 700-800 crore. “Some tough decisions need to be taken… The GoM has sought some clarifications and it will meet again to take a decision in a week or 10 days… the measures taken by Air India till now have been inadequate,” civil aviation minister Praful Patel said after emerging from the hour long meeting.
The GoM has been seeking concrete steps and a consolidated business plan to turn around the ailing national carrier.
Air India has accumulated losses of Rs 7,200 crore and its working capital debts have crossed Rs 17,000 crore. It was granted Rs 800 crore as first tranche of equity support in December last year, but the money is yet to be credited to the airline’s accounts.
04/02/10 Sindhu Bhattacharya/Daily News & Analysis

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Categories: NACIL Feb 2010