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AI to cut staff costs 15%

State-run Air India, caught between a deepening liquidity crisis and poor passenger load, plans to slash staff costs by more than 15 per cent as it gropes for options to stay afloat with an estimated Rs 15,000 crore debt-hole on its balance sheet.

india Updated: Jun 22, 2009 23:21 IST

State-run Air India, caught between a deepening liquidity crisis and poor passenger load, plans to slash staff costs by more than 15 per cent as it gropes for options to stay afloat with an estimated Rs 15,000 crore debt-hole on its balance sheet.

The company is now targeting to bring down its wage bill by Rs 500 crore from the current Rs 3,000 crore even as efforts are on to convince the government to offer a “bailout” package through a mix of debt and equity.

The company has given an internal four-member committee until mid-July to look at restructuring wage agreements and other bonuses linked to employee performance.

Besides a bloating wage bill, the company is also staring at an annual interest outgo of over Rs 1,200 crore to meet its working capital requirements. An official said the airline could resort to flight withdrawals and major route rationalisation to cut costs if government refused to infuse funds in the budget for 2009-10 in the first week of July.

“Air India is targeting a reduction in employee cost to the tune of Rs.500 crore per annum. Air India's employee cost is currently Rs 3000 crore plus annually. Besides reduction in wage cost, Air India is also looking at improving productivity of employees, elimination of restrictive work practices and reducing wasteful expenditure,” a company statement said.

A government source, who did not wish to be identified, said the airline’s top management would brief Prime Minister’s Principal Secretary TKA Nair about the company’s precarious financial health.

Cabinet Secretary KM Chandrasekhar met the airlines’s top brass on Saturday and weighed various options to help the beleaguered carrier stay afloat in an otherwise turbulent economic weather.

The airline, which was formed through a merger of international carrier Air India and domestic carrier Indian Airlines in 2007, has accumulated losses of Rs 4,334 crore.

Last week the airline’s chairman and managing director Arvind Jadhav asked its top managers to forgo one month's salary as part of efforts to survive the crisis, just days after delaying the payment of June salaries for regular employees.

A company spokesperson said the airline would maintain its normal schedule of flights and appealed to passengers to continue to book for their travel "as usual".

The employees’ unions have announced plans to protest against delayed salary payments wearing black badges. Jadhav, who met union representatives on Sunday, sought the employees' cooperation in turning around the airline.