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AI revamp plan: No more seats to rivals

July 10, 2009 08:58 IST

The civil aviation ministry has drawn up a plan for revamp of Air India, which proposes a ban on grant of new bilateral rights to international carriers, whose liberal distribution in recent years has come to be seen as a reason for the national carrier's woes.

The proposals include flying Air India Express, the low-cost service, on domestic routes, the mother ship doing away with loss-making flights, and a revamp of its board of directors. The total bailout package may exceed the estimates of Rs 4,000 crore (Rs 40 billion) floating in the air.

On routes in countries in West Asia or those such as China, the civil aviation ministry grants seats to carriers based on agreed bilateral rights with each of those countries.

Civil aviation minister Praful Patel, who held this portfolio in the first government of the United Progressive Alliance, too, has so far followed a liberal open-sky policy, sharply increasing the number of seats offered to West Asian airlines on flights connecting India. According to internal figures available with airlines, the total number of seats offered to West Asian carriers rose from 2.5 million in 2004 to 7.5 million last year.

Emirates, one of the largest West Asian airlines and the third largest connecting India (after Air India and Jet Airways) got to increase its India-related capacity four times from 12,400 seats a week in 2004 to 48,000 seats a week in 2008. In the same period, seats on Etihad Airways' India-related flights rose from 1,600 seats a week to 8,500.

This created a pocket of turbulence for Air India, which used to earn its bread and butter, and bacon and eggs, mainly from the West Asian sector. The airline now has only 23.55 per cent of the total seats on international flights connecting India, according to CAPA. West Asian carriers have 26.7 per cent.

The government has directed SBI Caps to prepare a restructuring plan, to be submitted by the first week of next month.

A senior official in the ministry confirmed all these proposals, and said: "There are four vacancies for independent directors, which will be filled by top CEOs of the country. They could be from financial institutions and the private sector."

Asked whether Tata Sons Chairman Ratan Tata would head the new International Advisory Board of Air India -- speculation is rife that he might -- the official said: "It is unlikely he will, but he might nominate one of his CEOs." A statement issued by Tata Sons said its chairman "has not yet taken any decision" on the government's offer.

Patel has asked his ministry and Air India to come up with a plan in 30 days to pull the airline out of the financial mess it has got into, with losses exceeding Rs 4,000 crore (Rs 40 billion).

A ministry official said, while the equity capital of the company, at Rs 140 crore (Rs 1.4 billion), was in line with that of other carriers, it will be raised after the restructuring.

Asked how the government intended to handle Air India's 31,000-strong manpower, the official said: "The manpower of Air India is also used to service other airlines (for instance, they do ground handling for international carriers for a fee), so a comparison with other carriers which run only their own aircraft is unfair. I am not saying the number is low, but we have still not decided how to bring it down."

Mihir Mishra & Surajeet Das Gupta in New Delhi