Air India's last chance

New Delhi: In the 18 months that Arvind Jadhav has been the chairman of state-owned Air India, he has faced more than one crisis. Recently, the independent directors on the company’s board demanded the removal of Pawan Arora, the boss of Air India Express, the low-cost arm of the airline, for misrepresenting facts. The directive was opposed by Chief Operating Officer Gustav Baldauf who told Jadhav the procedure was not followed and Arora wasn’t given a chance to defend the allegations against him.
Meanwhile, Air India’s decision to shift domestic operations in Delhi to the new terminal, T3, before rivals turned out to be quite a disaster — there were huge cancellations, flight delays and of course harried customers.
Jadhav’s hands are tied. The airline’s survival is to a large extent dependent on the government which alone can bail it out of the financial mess. Air India has a working capital debt of over Rs 18,000 crore, which was being used to fund cash losses, and this is projected to go up to over Rs 30,000 crore within a few years, if the government’s support does not come quickly. This means higher interest payout.
Naturally, Jadhav has asked the government for help. His demands have not been met even halfway. The government has infused Rs 800 crore in equity, and has said that the next tranche of Rs 1,200 crore will only come if Air India meets the cost-reduction targets — something it hasn’t done so far.
29/11/10 Surajeet Das Gupta & Mihir Mishra/Business Standard

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Categories: aAir India Nov 2010