The government will adopt a three-pronged approach to revive Air India (AI) with the ailing carrier all set to receive an equity infusion of Rs6,600 crore - a move that will wipe out its entire outstanding dues to vendors and oil companies.
The equity infusion would be in addition to Rs1,200 crore that has been promised by the government for fiscal year 2011-12. The airline's Rs43,000 crore of working capital and long-term loans would be restructured, which would considerably bring down the annual interest burden of Rs3,400 crore.
AI would also be asked to reduce operational losses by increasing revenues, making better use of its aircraft and manpower. The airline's daily revenue is Rs36 crore while the expenditure is Rs57 crore, leading to a per day loss of Rs21 crore.
Aviation secretary Nasim Zaidi and AI chairman and managing director Rohit Nandan have firmed up other plans as well for the airline's revival.
The two paid a surprise visit to the Delhi airport last Sunday, interacting with passengers and staff, to understand the problems on the ground. The visit created quite a stir at the airport when the staff came to know about the senior bureaucrats.
Among other measures to be taken is to revive the airline's hotel business and rid it off consultants. AI has hundreds of consultants - most are retired employees hired at exorbitant salaries.
In a major boost for the airline, according to an agreement reached with oil companies, AI would be required to pay for a month's fuel every quarter with the remaining two months fuel being supplied on credit. This would help the airline pay salaries on time, sources said.