Air India is on the path to a strong recovery and figures for the first quarter of the current year show that there has been a strong rebound by the country's national carrier, according to Union Minister for Civil Aviation Praful Patel.
Addressing a press conference after Air India chairman & managing director Arvind Jadhav and his team made a presentation to the board of directors including independent directors on the financial restructuring plans for the airline, Mr. Patel also said there would be no job cuts or wage reduction. The independent board of directors includes Anand Mahindra, vice chairman & managing director, Mahindra & Mahindra, Air Chief Marshal (retd.) Fali Major, Harsh Neotia and Amit Mitra.
Mr. Patel said there was no need for job cuts as the growth plans envisaged would absorb the existing manpower, “with people moving from one job to another within the organisation.''
Mr. Mahindra said that earlier in the day, they had had discussions with the 14 unions of Air India covering all 33,000 employees and they had “all given their commitment to pull together and make the plans work. Also, a Business Transformation Office has been set up to monitor progress on the plan.''
The new turnaround plan focuses on restructuring the company's debt and streamlining its expenses. “It is not a final plan but a basis on which further fine tuning will happen within Air India,'' said Mr. Patel. SBI Caps has been appointed by the board for a financial plan and will submit its report by mid-August.
The draft plan envisages restructuring working capital loans through a mix of bonds guaranteed by the government with longer tenor and bullet payments and the release of security given under long term loans to provide security for working capital loans to reduce the borrowing costs.
Last year, the airline received equity infusion of Rs. 800 crore from the government and to qualify for the second round amounting to Rs. 1200 crore this year, the airline had to show improved performance.
Air India has a current account debt of around Rs. 18,000 crore but the financial numbers for the first quarter of 2010-11 show that traffic revenue was up by Rs. 638 crore – passenger revenue up 28 per cent by Rs. 546 crore and cargo revenue up 61 per cent by Rs. 92 crore over the same period last year, reflecting a rebound in traffic.
Passenger load factor on the domestic sector was 75 per cent (67 per cent) while on the international sector, it was at 66 per cent (62 per cent). The yield went up 14 per cent on the network and average passengers carried per day was up 18 per cent at 36,000.
However, the improvement in the quarter was offset by the increase in fuel cost by Rs. 396 crore due to a 33 per cent rise in prices and an increase in depreciation and interest of Rs. 292 crore due to induction of the new fleet. To reduce operating losses, the airline has projected an aggressive 29 per cent increase in operating revenue for the full year 2010-11.
On the objections raised by the Ministry of Environment & Forests to the proposed Navi Mumbai airport, Mr. Patel said: “There is no question of change of site. In February 2009, the MoEF allowed construction of Greenfield airports on coastal regulation zone (CRZ) areas. Otherwise, it will be a big loss to the city, the state and the country as very soon the Mumbai airports will not be able to handle any more flights.''
