The Indian government has thrown struggling national carrier Air India a lifeline by offering a financial aid package on condition it undertakes a “massive cost reduction” programme.
The offer by prime minister Manmohan Singh follows his meeting with the airline’s new chairman and managing director, Arvid Jadhav.Praful Patel, India’s aviation minister, said: “The government is fully committed to Air India to tide it over the present crisis”. However he added that as a condition Air India “must shape up, become leaner and trimmer, and also must put its best foot forward”.
Mr Patel said Air India, and the unions that represent its 31,000 workforce, must undertake radical cost-cutting and other financial improvements to qualify for the assistance.
The airline has already said it was looking to cut Rs5bn ($103m) in staffing costs, about 17 percent of its total wage bill as it faces its worst liquidity crisis in its 75-year history.
Debts are running at $4bn and last week Jadhav asked 150 top executives to voluntarily forgo salaries in July, and announced that June pay for staffers would be delayed by two weeks.
He said the Indian national carrier had reached “the moment of truth”, and needed 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 staff. “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.”
The government is reviewing the carrier’s order for more than 100 new Boeing and Airbus aircraft, about half of which have yet to be delivered. It also intends to shake up Air India’s board by appointing eight independent directors.
After years of monopoly, Air India’s 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.