Air India faces moment of truth

23rd Jun 2009

Air India said it is looking to cut Rs5bn ($103m) in staffing costs, about 17 percent of its total wage bill, and desperately needs a government bail-out as it battles for survival.

Arvind Jadhav, the recently appointed chairman and managing director, said the Indian national carrier had reached “the moment of truth”, and need to cuts about 17 percent of its total wage bill.“This is an hour of crisis for all of us,” Mr Jadhav said in an e-mail circulated to 31,000 staff members. “It is a fight for survival - the survival of our airline. I am looking for every single employee of our airline to rise to the challenge.”

Last week he asked 150 top executives to voluntarily forgo salaries in July, and announced that June pay for staffers would be delayed by two weeks.

Air India said it was entering talks with union leaders on how to cost cuts. It also said it was looking at “improving productivity of employees, elimination of restrictive work practices and reducing wasteful expenditure”, the statement said.

The airline racked up losses of about Rs40bn for the financial year ending in March, whilst its debt grew to around $4bn.


Its domestic market is coming under increasing pressure from leaner private airlines, reflected in its share in passenger traffic falling from 38 percent in 2004 to 15 percent early this year.

On an international level, markets are being eroded by intensifying competition from Gulf carriers, which are expanding aggressively into India.

The airline has called on the newly-elected government for a bail-out of around Rs40bn. However the new administration has its own financial worries caused by growing fiscal deficit and a heavier social welfare burden.



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