Indian Government approves USD173 million in fresh funding for Air India

Indian Ministry of Civil Aviation (MoCA) announced (18-Feb-2010) the Indian Government approved a proposal to provide INR8 billion (USD173 million) in fresh equity support ( in two equal monthly installments) to Air India's parent, National Aviation Company of India Limited (NACIL). The infusion had earlier been approved by the Group of Ministers (GoM) and the Indian Ministry of Finance (MoF). The release of funds will be "calibrated to the achievement of milestones laid down by the GoM", which accepted the company's savings and cost reduction plan of USD413 million (INR19.1 billion) for FY2009/10. NACIL has initiated a multi-pronged turnaround plan which includes the following measures:

• Complete rationalisation of manpower and productivity-linked incentive;
  • Expected to result in cost savings of USD24.4 million p/a;
  • Large-scale redeployment of staff;
  • Closure of all overseas offices where NACIL does not operate;
• Complete the integration process of Indian Airlines and Air India;
• Review of all agreements on technical and operational matters;
• Fleet rationalisation;
  
  • Reduction of fleet size from 146 aircraft to 105 by Mar-2011, with 22 aircraft being removed by way of leasing out, return of leased aircraft and sale of aircraft. It has been estimated this will result in annual cost savings of USD43 million on maintenance and inventory cost and USD86 million in fuel consumption and efficiency gains. Future requirements of cockpit, cabin crew and engineers would be reduced, resulting in annual savings of USD64.8 million;
• Route rationalisation for Winter Schedule 2009 (up to Mar-2010);
  • Restructuring of operations over the Frankfurt hub (effective Dec-2009);
  • Capacity adjustments, rationalisation of overlap operations of Air India and Air India Express;
  • Reduction of positioning flights and six B747 to be taken out of service and replaced by other aircraft will result in savings of USD121.7 million in the current year;
  • Medium term network strategy by end of Dec-2010 is being developed with the assistance of Simat Helliesen & Eichner that will focus on profitable hub operations, leveraging partners for efficiency, such as the Star Alliance;
• Operational and financial parameters in 1H2FY2009/10 (six months ended 30-Sep-2009);
  • Passenger numbers: 5.61 million, +5.45%;
  • Seat factor: 62%, +4.3 ppts;
  • Operating profit (loss): (USD438.7 million), compared to (USD570.4 million) in the six months ended 30-Sep-2008. [more]