Air India to undergo "painful" three year restructuring

Air India Chairman and Managing Director, Arvind Jadhav, announced plans to separate the carrier's cargo, engineering and ground handling operations from its mainline business under a proposed three-year turn around plan (Bloomberg, 07-Aug-2009). The plan also includes "painful" cost saving measures, including workforce reductions, aircraft order cancellations, sales of older aircraft and rationalisation of capacity. The initial nine-month period of the plan will focus on survival and servicing Air India's debts. Following the initial phase, the business units will be split off. Approximately 18 months into the turnaround plan, the carrier will prepare its mainline business for an IPO, expected in 2011 or 2012.

Air India: "It's going to be a painful exercise. It is going to hurt; it's going to hurt a lot of people. We've got into a cash-flow problem. We are unable to service our interest and debt liabilities with our internal resources," Arvind Jadhav, Chairman & Managing Director. Source: livemint, 08-Aug-2009.