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Home / India News / Air India seeks to cut costs ahead of privatisation

Air India seeks to cut costs ahead of privatisation

Air India’s accumulated debt is estimated to be more than Rs 69,000 crore. It posted a loss of Rs 8,556 crore in financial year 2018-19, as against a net loss of Rs 5,348 crore in the previous financial year.

india Updated: Jul 17, 2020 03:49 IST
HT Correspondent
HT Correspondent
Hindustan Times, New Delhi
The global aviation industry has suffered heavy losses because of lockdowns imposed by several countries to curb the spread of the coronovirus disease.
The global aviation industry has suffered heavy losses because of lockdowns imposed by several countries to curb the spread of the coronovirus disease.(HT File Photo)

Air India is seeking to reduce costs and lower its dependence on the government by cutting debt and aircraft leases/rentals and trimming staff and operational expenditure, chairman and managing director Rajiv Bansal said on Thursday.

The cost-cutting drive dovetails with a government plan to sell its entire stake in Air India amid increasing debt and mounting losses. The Centre, in January, started the process by releasing an information document for investors and offering access to financial and other data of Air India and its subsidiaries.

The government’s entire stake in Air India, its 100% stake in low-cost subsidiary Air India Express Ltd. and 50% stake in ground handling unit Air India SATS Airport Services Private Limited. are on offer.

“We are trying to increase the topline, and are trying to contain costs. We are looking at measures of containing cost by reducing debt, reducing staffing cost, operating cost and aircraft rentals,” Bansal said at a press conference with aviation minister Hardeep Puri. “We have cut down staff cost, we have laid off employees working with us post-retirement and we are in negotiations with pilots, cabin crew and other employee categories.”

An attempt to auction a majority stake almost two years ago failed to draw any bids. The airline’s accumulated debt is estimated to be more than Rs 69,000 crore. It posted a loss of Rs 8,556 crore in financial year 2018-19, as against a net loss of Rs 5,348 crore in the previous financial year.

To Bansal’s comment that Air India wanted to reduce its dependence on the government, Puri said the government may not be in a position to extend financial backing to the national airline “due to the current situation.”

“We don’t have a choice, we will have to be persistent with the privatisation effort,” the minister said.

Amid the Covid-19 pandemic that has taken a heavy toll on the aviation industry, the government in June extended the deadline for submissions of bids for Air India to August 31, the third extension since the process began in January. Indian airlines will face a revenue loss of Rs 1.3 trillion between fiscal 2020 and 2022 because of the pandemic, according to rating agency Crisil.

Earlier this week, the national airline’s board of directors approved a leave without pay (LWP) scheme for permanent staff ranging from six months to two years, extendable to five years. Air India has 9,426 employees on its rolls, out of which 4,200 are on contractual terms, according to the civil aviation ministry.

On Thursday, the Indian Commercial Pilots’ Association (ICPA), the pilots’ union of Air India ,wrote to Bansal, alleging that a proposed pay cut for pilots amounted to almost 60% of gross emoluments, adding that pilots had not been paid 70% of their salaries since April.

“We have expressed our willingness to negotiate a pay cut in line with the current market conditions. We were told by the ministry officials that we are being compared to one of the leading low cost private carriers, it was then explained to the MoCA {ministry of civil aviation} officials how the worst conditions of these private airlines were being cherry-picked to our disadvantage.,” ICPA said in the letter, a copy of which has been reviewed by Hindustan Times.

“The proposed cut for pilots is almost 60% of gross emoluments. It is hilarious to note that the top management has proposed a meagre 3.5% cut on its own gross salary. For eg; the Director, Personnel takes a minuscule cut of 4% on gross pay while a co-pilot who is paid less than the market is given a cut of 60%. How is this justified? Doesn’t this amount to unchecked greed and selfishness,” the letter added.

When contacted by HT, a spokesperson for Air India said: these were internal issues on which the airline wouldn’t like to make any comment.

“The entire civil aviation industry world over is doing cost cutting. We have to face the reality,” Puri said at the press conference.

The global aviation industry has suffered heavy losses because of lockdowns imposed by several countries to curb the spread of the coronovirus disease. According to the International Air Transport Association (IATA), airlines in the Asia-Pacific region will be the hardest hit by the Covid-19 crisis, with losses expected to be around $29 billion for 2020. This is more than a third of the $84.3 billion industry losses globally.

In India alone, IATA expects passenger demand in 2020 to shrink by 49% compared to last year. Potential jobs impact in aviation and sectors dependent on aviation will be felt by more than 3 million people.

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