Govt may give Air India one billion dollar bailout | india | Hindustan Times
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Govt may give Air India one billion dollar bailout

The Indian government said on Wednesday it may give ailing flagship carrier Air India a one-billion-dollar bailout on condition that the state-run airline cuts costs.

india Updated: Oct 14, 2009 20:15 IST

The Indian government said on Wednesday it may give ailing flagship carrier Air India a one-billion-dollar bailout on condition that the state-run airline cuts costs.

"What the government is looking at is (injecting) 50 billion rupees (one billion dollars) in phases," India's Civil Aviation Minister Praful Patel told a news conference.

But the handout "will be conditional on cost-cutting measures and revenue enhancement measures," Patel told a news conference in Mumbai.

He said he would name seven independent directors to the board to improve the airline's operating efficiency. The minister said Air India had targeted 30 billion rupees in cost cuts and was aiming to increase revenues by 20 billion rupees "over the next two years."

"Stronger marketing efforts need to be done to attract more customers," he said.

Air India lost one billion dollars in the past financial year to March 2008, an airline spokesman said last month. India's airline industry has been hit by overcapacity and a sharp drop in passengers as a result of the global economic slowdown.

The airline announced plans last month to cut performance-related pay by up to 50 per cent for over 7,000 employees, including top management.

But the carrier was forced to delay implementation of the plan after senior pilots at the airline staged a five-day work stoppage in protest.

The airline afterwards announced the formation of a committee that includes Air India chairman Arvind Jadhav and senior Civil Aviation Ministry staff to examine the pay cuts issue.

The aviation minister said the government bailout plan would be made up of two main parts -- "the induction of equity" and the restructuring of high-cost debt into low-cost debt.

The minister met reporters after holding separate meetings with Air India employees unions and the management. "The unions have understood that certain cost-cutting measures are inevitable," Patel said, without elaborating. He added that the government was "cautiously optimistic" that the Indian airlines' sector was on the mend.

"There has been a slight improvement in the last two months," he said.