The Maharaja will have to give up his full-service carrier status and transform into a commoner - low-fare airline - on most domestic routes to survive.
On Wednesday, PM Manmohan Singh spent 90 minutes with aviation ministry honchos on the cash-strapped airline's woes and its demands for a bailout from the government. While he is learnt to have promised support to the national carrier, it was made abundantly clear that any bailout will come if - and only if - Air India is able to shed its flab, become competitive and completely transform itself. Otherwise, it's curtains for the airline.
After meeting the PM, aviation minister Praful Patel said the government has formed a four-member committee of secretaries - headed by the cabinet secretary and comprising of the finance, aviation secretaries and principal secretary to the PM.
"AI's restructuring plan along with the request for equity infusion-cum-loan has to be submitted to them within a month. Unless a series of measures are taken to improve the airline, it will not be possible for the government to keep supporting in unconditionally. This is one last chance Air India has got," Patel said.
This "radical restructuring" could mean Air India transforming into a low fare airline on almost all domestic routes except a few niche metro sectors where full service airlines get some business. In this downturn, only LCCs (low-cost carriers) have seen good load factors and both Jet and Kingfisher are increasingly using their domestic fleet for their budget arms.
"Indian carriers will have to redefine their business models. If someone has a capacity that can't be supported by a full service model, what choice does he have?" Patel said. While AI's efficiency has touched a very low level, the aviation ministry has not been able to turn it around despite placing orders for new planes worth Rs 45,000 crore and merging Air India and Indian Airlines, the committee of secretaries will review airline's performance every month. More importantly, it will see if Air India is meeting the promises it made to get the bailout money.
"The management will be restructured within a month. Eminent people will be brought on the airline's board, including functional directors. Induction of new aircraft into the fleet will not be slowed down as Air India will phase out its old aircraft," Patel said.
The airline has lost about Rs 5,000 crore in 2008-09 and seen its working capital requirement increasing from Rs 2,369 crore in March this year to Rs 16,300 crore in May.
With an equity base of Rs 145 crore and accumulated losses of Rs 7,200 crore till May 2009, the airline is supposed to fund 111 aircraft purchase whose cost is now closer to Rs 50,000 crore.
On Wednesday, PM Manmohan Singh spent 90 minutes with aviation ministry honchos on the cash-strapped airline's woes and its demands for a bailout from the government. While he is learnt to have promised support to the national carrier, it was made abundantly clear that any bailout will come if - and only if - Air India is able to shed its flab, become competitive and completely transform itself. Otherwise, it's curtains for the airline.
After meeting the PM, aviation minister Praful Patel said the government has formed a four-member committee of secretaries - headed by the cabinet secretary and comprising of the finance, aviation secretaries and principal secretary to the PM.
"AI's restructuring plan along with the request for equity infusion-cum-loan has to be submitted to them within a month. Unless a series of measures are taken to improve the airline, it will not be possible for the government to keep supporting in unconditionally. This is one last chance Air India has got," Patel said.
This "radical restructuring" could mean Air India transforming into a low fare airline on almost all domestic routes except a few niche metro sectors where full service airlines get some business. In this downturn, only LCCs (low-cost carriers) have seen good load factors and both Jet and Kingfisher are increasingly using their domestic fleet for their budget arms.
"Indian carriers will have to redefine their business models. If someone has a capacity that can't be supported by a full service model, what choice does he have?" Patel said. While AI's efficiency has touched a very low level, the aviation ministry has not been able to turn it around despite placing orders for new planes worth Rs 45,000 crore and merging Air India and Indian Airlines, the committee of secretaries will review airline's performance every month. More importantly, it will see if Air India is meeting the promises it made to get the bailout money.
"The management will be restructured within a month. Eminent people will be brought on the airline's board, including functional directors. Induction of new aircraft into the fleet will not be slowed down as Air India will phase out its old aircraft," Patel said.
The airline has lost about Rs 5,000 crore in 2008-09 and seen its working capital requirement increasing from Rs 2,369 crore in March this year to Rs 16,300 crore in May.
With an equity base of Rs 145 crore and accumulated losses of Rs 7,200 crore till May 2009, the airline is supposed to fund 111 aircraft purchase whose cost is now closer to Rs 50,000 crore.
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