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Air India advised no hike, promotions for 3 years

Last updated on: January 7, 2011 09:46 IST

Air India advised no hike, promotions for 3 years

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Mihir Mishra in New Delhi

To turn around ailing Air India, financial advisory firm Deloitte has suggested a series of measures, including a freeze on any increase in pay or promotion of its 31,000 employees for the next three years.

The airline has an annual wage bill of Rs 3,100 crore (Rs 31 billion) and the report has said as many as 2,600 employees will retire during the period of freeze.

It has also recommended the company cut spending on aviation turbine fuel by Rs 300 crore (Rs 3 billion) yearly, by negotiating more aggressively with suppliers for domestic routes.

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In the next board meeting, on January 19, the board of directors is likely to discuss some of the Deloitte suggestions.
The company was hired to vet the airline's financial plans.

AI's annual interest payment is around Rs 1,800 crore on debt of Rs 40,000 crore (Rs 400 billion) 19,000 crore (Rs 190 billion) is high-cost working capital debt) and has accumulated losses of Rs 15,000 crore (Rs 150 billion).

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The carrier lost Rs 2,226 crore (Rs 22.26 billion) in 2007-08, Rs 7,189 crore (Rs 71.89 billion) in 2008-09, and Rs 5,551 crore (Rs 55.51 billion) in 2009-10.

The government carrier had earlier said a way to cut fuel costs would be to take ATF suppliers from the private sector, which offer better volume discounts.

Currently, most of AI's fuel is taken from the state-owned oil corporations in India. Its annual fuel bill is Rs 4,000 crore (Rs 40 billion).

State-run oil companies, to which the carrier , have already refused the airline credit from December 13, forcing it to pay them about Rs 12.5 crore (Rs 125 million) daily for the fuel it requires for national and international flights.

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What's Ailing The Maharaja

  • The airlines has an annual wage bill of Rs 3,100 crore (Rs 31 billion); report says 2,600 employees will retire during the period of freeze
  • Annual interest payment is around Rs 1,800 crore (Rs 18 billion) on debt of Rs 40,000 crore (Rs 400 billion) (Rs 19,000 crore or Rs 190 billion) is high-cost working capital debt)
  • Has accumulated losses of Rs 15,000 crore (Rs 150 billion) -- lost Rs 2,226 crore (Rs 22.26 billion) in 2007-08, Rs 7,189 crore (Rs 71.89 billion) in 2008-09, and Rs 5,551 crore (Rs 55.51 billion) in 2009-10
  • Annual fuel bill is Rs 4,000 crore (Rs 40 billion)
  • Owes about Rs 2,300 crore (Rs 23 billion) to state-owned oil corporations; has been asked to pay them around Rs 12.5 crore (Rs 125 million) daily
  • Owes Rs 600 crore (Rs 6 billion) to the Airports Authority of India

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Image: The Air India mascot Maharaja.

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"The airline will be negotiating with private oil companies like Reliance and Essar on a discount and will be able to save Rs 300 crore (Rs 3 billion) per year through this," said a source.

AI also owes Rs 600 crore (Rs 6 billion) to the Airports Authority of India.

The airline has also asked for another equity infusion, of Rs 2,000 crore (Rs 20 billion), from the government in the current financial year.

The government gave it a Rs 1,200-crore (Rs 12-billion) infusion recently and Rs 800 crore (Rs 8 billion) in 2009-10, taking the equity base to Rs 2,145 crore (Rs 21.45 billion).



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