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No layoffs planned in Air India restructuring

Air India's latest turnaround plan, presented to the board and unions Sunday, includes no staff cuts - the very thing critics say is required to turn around India's troubled national carrier.

india Updated: Jul 25, 2010 20:20 IST

Air India's latest turnaround plan, presented to the board and unions Sunday, includes no staff cuts - the very thing critics say is required to turn around India's troubled national carrier.

"There is no need to cut manpower size by reducing jobs and sending people home," Civil Aviation Minister Praful Patel said on Sunday.

He also pledged further help to Air India as it struggles to restructure its pricey debt and to pacify restive unions, which have staged two debilitating strikes since September.

The government plans to offer guarantees to lenders to encourage them to take on Air India's debt at lower interest rates. Patel said the government - which handed over 8 billion rupees ($170 million) last fiscal year and pledged another 12 billion rupees ($255 million) this year - would consider further equity infusions if the carrier continues to cut costs and improve revenues.

"The government stands committed to further infusions of equity," he said. Kapil Kaul, chief executive of the India unit of the Center for Asia Pacific Aviation, an independent aviation research group, has estimated that Air India has accumulated an unserviceable debt burden of about $8 billion, and that its staff, which tops 30,000, is about twice as big as it should be, costing the carrier $800 million a year. Air India seems to be relying on natural attrition to reduce head count.

Executives also hope that a return to growth in the sector and spinning off new businesses - like cargo handling for third parties - will keep its many employees busy. Air traffic revenue for the April to June quarter increased by 6.4 billion rupees ($136 million), with passenger revenues up 28 percent to 5.5 billion rupees ($117 million) and cargo revenues up 61 percent, to 920 million rupees ($19.6 million). The airline said it served an average of 36,000 passengers a day during the quarter, up 18 per cent from the year-ago period.

Its fuel bill rose 33 per cent during the quarter, costing 4.9 billion rupees ($104 million).