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Slow decisions delay AI revival: Ministry official

Last updated on: January 4, 2012 12:54 IST

Slow decisions delay AI revival: Ministry official

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Mihir Mishra in New Delhi

The much-awaited revival of state-owned Air India is set to face further delay, courtesy continued laxity in the government's decision-making process -- much to the frustration of the carrier.

It is on three key issues that the government has yet to take decisions: deliveries of Boeing 787 Dreamliners, infusion of Rs 6,600 crore (Rs 66 billion) equity this year and formation of two strategic business units for engineering and ground handling.

"As it is, the government is in a slow mode," notes a senior civil aviation ministry official.

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"Such is the laxity that even the approval of minutes of a group of ministers) meeting takes over two weeks.

"This, when it won't normally take more than three days."

STUCK PLANS
Air India awaits decision on infusion of Rs 6,600 crore equity and formation of two strategic business units
The civil aviation ministry to send Cabinet notes on delivery of Boeing Deamliners and formation of strategic business units
The govt has already infused Rs 3,200 crore in the airline
AI has ordered 27 Dreamliners; Committee of officers has recommended the deliveries of 14 of these on sale & leaseback
Banks are working on restructuring Rs 18,000 crore debt
Out of Rs 18,000 crore, Rs 11,000 crore will be converted into long-term and the rest into equity by banks

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The official predicts delay in even urgent matters like the delivery of 787s, which require urgent attention.

"The whole delivery process is to take time. . . we don't know when," he shrugs.

Air India, headquartered in Mumbai, wants quick decisions on the matter so that it can implement the turnaround plan in full force.

A senior official with the company says the government must urgently take decision on the deliveries of Boeing 787s, as their deliveries are slated to start by mid-January.

"Getting 787s is an integral part of our turnaround plan. "We also need to train our pilots to fly 787s," he adds.

As for the training, the official says it will require "at least three weeks' time".

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Image: Air India building in Mumbai.


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So, "if the government takes a decision late, we will have the planes but no one to fly it", he points out.

Other decisions on equity infusion and formation of SBUs should also come soon, as a lot of work will follow after that, he adds.

Formation of engineering and ground-handling SBUs also requires Cabinet approval. Formation of profit-making units and shifting of staff are key components of the turnaround plan.

These units will look for business from outside and provide services to Air India at cheaper rates.

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The GH subsidiary will take 7,465 people, while 10,481 people will be shifted to the engineering subsidiary, without any change in terms and conditions.

The move will shift a wage bill of Rs 931 crore (Rs 9.31 billion) to the engineering wing, and Rs 600 crore (Rs 6 billion) to the GH wing.

At present, the annual wage bill of Air India is Rs 3,100 crore (Rs 31 billion), for 30,000 employees. However, the services provided to Air India by these subsidiaries will come under the tax ambit.

The decision on infusion of Rs 6,600 crore or Rs 66 billion (including Rs 1,200 crore or Rs 12 billion already given) equity was referred to the Cabinet by the GoM headed by Finance Minister Pranab Mukherjee.

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As of now, the government has infused Rs 3,200 crore (Rs 32 billion) as equity in the airline.

Further, the GoM has recommended infusion of Rs 23,000 crore (Rs 230 billion) as equity in the airline by 2031.

Air India is trying to trying to implement a turnaround plan that projects the company to become profitable in five years.

Currently, it is reeling under losses of Rs 20,000 crore (Rs 200 billion), besides a debt of over Rs 46,000 crore (Rs 460 billion).

Of AI's Rs 46,950-crore (Rs 469.5-billion) debt, loans for buying aircraft stand at Rs 20,185 crore (Rs 201.85 billion).

Working capital loans are worth Rs 22,165 crore (Rs 221.65 billion) and others from overdues.



Tags: Air India

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