22-Nov-2011 10:15 AM

Delhi considering strategic sale of Air India post turnaround; to invest USD5.8bn over 10 years

Air India will reportedly receive a INR300 billion (USD5.8 billion) bailout from the Government over a period of 10 years, after the Group of Ministers (GoM) headed by the Finance Minister, Pranab Mukherjee, reportedly voted in favour of a new financial turnaround for the carrier. According to local media reports, the panel also explored the possibility of disinvesting the government stake in the carrier once it returns to profitability. The Government envisages the carrier will report a positive EBITDA result by Mar-2013 and make a cash profit in Mar-2018. An oversight panel will reportedly be established to ensure the carrier achieves operational efficiency. The committee will be established by the Civil Aviation Ministry and would have representatives from the Finance Ministry. The plan also reportedly provides the following targets:

  • Load factor: Air India will need to improve passenger load factor from 67% at present to 73% by 2015; 
  • OTP: The company has to improve on-time performance (OTP) from 71.7% at present to 90% by 2013; 
  • Fleet: There will be no new induction of aircraft except B787 equipment. Any additional aircraft should be on lease;
  • HR policy: The policy across Air India and subsidiaries will be reviewed. It also noted the need for a voluntary retirement scheme (VRS), for which a package needs to be worked out within three months. Suggestions also include no productivity linked incentives for staff until the airline is able to generate profits before tax;
  • Strategic partner: The Indian Government will look for a strategic partner after the carrier becomes profitable;
  • Non-core asset disinvestment: Disinvestment of MRO operations and the carrier's ground handling unit into separate business units by Jan-2012.

Want More News Like This?

CAPA Membership gives you access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More