4-Jan-2013 8:27 AM

Indian Civil Aviation Ministry establishes committee to suggest cost-cutting measures for Air India

India's Union Minister of Civil Aviation Ajit Singh constituted (03-Jan-2013) a five-member committee, headed by Prof Ravindra H Dholakia, Professor of Economics and Public Systems, IIM, Ahmedabad to suggest various measures for cost-cutting and optimal utilisation of resources in Air India. Details:

  • Other members of the committee: Dr Prabhat Kumar, Joint Secretary Ministry of Civil Aviation, Shri Rajesh Agrawal, Director Finance ICRISAT, Shri S Mukherjee, ex-director commercial and inflight services Air India, Shri Nasir Ali, joint MD Air India. Shri Nasir Ali will also act as a member secretary of the committee;
  • Reporting of committee: The committee has been asked to submit its report in two months and has also been asked to give immediate/interim recommendations without waiting for final report, so that these can be implemented in Air India immediately without any loss of time;
  • Committee terms of reference: Include analysis of all ‘Heads of Expenses’ of Air India in the light of best practices adopted by various other airlines in the world; examination and analysis of various measures, including cost-cutting, adopted by other ‘turned around’ airlines in the past; and identification of various loopholes in the existing structure and functioning of Air India leading to wasteful expenditure, and also to suggest measures for plugging such loopholes. The committee will also analyse various cost components and identify those expenses and costs which can be abolished immediately, or reduced in phases or curtailed after sometime in future. It will also analyse the inventories of spare-parts and suggest a system of Optimal Inventory Management and disposal of obsolete/excess inventories. It will critically review the expenses on overseas offices including the manpower deployment and suggest measures to reduce such expenses, will analyse the ATF utilisation by Air India and suggest measures to reduce/optimise ATF utilisation in the background of best practices followed by other airlines. The committee will also analyse all other factors which are adversely affecting the financial health of Air India and suggest plan for removing such factors;
  • Cost concerns: Recently, while reviewing the functioning of Air India, Mr Singh expressed his "grave concern on the projected net shortfall of Rs. 404 crores per month by Air India". He told Air India that without cutting redundant costs and optimally utilising resources, it will be difficult to meet this shortfall, and year wise financial projections which are envisaged in the Financial Restructuring Plan (FRP) approved by the Cabinet. As per FRP, Air India is supposed to be EBITDA positive by the end of the financial year. [more - original PR]

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