AI gets Rs 2000cr lifeline

NEW DELHI: The cash-strapped Maharaja will not go bankrupt, at least for now. The government on Thursday agreed to inject Rs 2,000 crore in AI this


fiscal in a phase-wise manner of Rs 400 crore per month, subject to the airline cuts costs and increases revenue. The Pranab Mukherjee-headed Group of Ministers (GoM) met on Thursday and decided to do a monthly review of AI's performance before giving the next tranche of Rs 400 crore.

Without a bailout, the AI-IA combine — that has a monthly cash loss of Rs 400 crore — may not have survived beyond this year. The aviation ministry was eying Rs 5,000 crore and Rs 9,000 crore as equity infusion and aircraft purchase assistance over next three years. But the GoM has for now agreed to recommend to the Union Cabinet phase-wise infusion of fund till March 2010. Future funding will be decided on AI's progress card.

GoM's biggest worry was how deep-in-red AI would fund the Rs 55,000 crore order to acquire 111 new aircraft. The civil aviation ministry pointed out that AI-IA combine's aircraft order size has been halved in value terms.

"Out of the 111 new planes, 50 were wide body aircraft that accounted for over 65% of the total bill. Of these big ones, 27 Boeing 787 Dreamliners are nowhere on radar as they are yet to fly. Delivery of three Boeing 77 have been deferred to 2013 and three of them — already with AI — are being leased out. So, the aircraft order in terms of monetary value has been halved with these 33 twin aisle planes out of the radar," said sources.

Both Mukherjee and Chidamabaram are learnt to have been sceptical of AI's tall claims on revenue and cost fronts. "Employees must know this money has not come easily and focus on cost-cutting has to remain," they are learnt to have told Patel and the AI management. Patel told TOI: "A number of steps will be taken to cut costs by rationalising routes and leasing aircraft. Cutting salaries is not the only way to cut costs and the management must look at all other means very closely. There is no room for complacency as fund infusion is closely linked to achieving success on cost cutting and revenue generation."

The GoM is also learnt to have promised Arvind Jadhav, CMD, certain degree of freedom to take tough decisions without any interference. In a previous GoM, Chidambaram had questioned the accountability of bureaucrats who headed AI in the past and presided over its decline.

"By early January, a number of tough steps will be taken. This will be in terms of cutting loss-making routes and instilling discipline," said highly-placed sources. AI loses Rs 3,000 crore on 30-odd routes alone and most of them could be closed.
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ASHWANI SUHALKA PGDM 2nd Yr