Govt to infuse Rs 800 cr into Air India

The Government on Thursday approved Rs 800 crore equity infusion into the beleaguered national carrier Air India.

The Cabinet Committee on Economic Affairs (CCEA )headed by Prime Minister Manmohan Singh approved the fresh equity for National Aviation Co of India Ltd, the company that runs Air India.

The spokesperson for CCEA said the approval to release equity support in two equal monthly installments would have to be calibrated with the achievement of cost-reduction milestones laid down by the GoM.

The financial losses of NACIL have been compounded by weakening of its revenue stream, a high cost structure and costly legacy assets (obsolete assets) that have resulted in rising liabilities.

Following directions by the government, NACIL initiated a multi-pronged turnaround plan, which included rationalisation and redeployment of manpower and productivity linked incentive.

A roadmap for completion of the integration process of erstwhile Indian Airlines and Air India following their July 2007 merger is also part of the turnaround plan.

The airline also began the process of returning all its leased aircraft and review all agreements on technical and operational matters in a bid to slash costs. It also decided to close down all overseas offices where Air India did not operate.

After a presentation on these steps for financial restructuring, the GoM had accepted the company’s savings and cost reduction plan of Rs 1,911 crores for the financial year 2009-10.

The national carrier also initiated measures for fleet rationalisation and route profitability as part of its turnaround plan.

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