Air India has readied a new revival plan that would see the national carrier turning around in 2-3 year, says AI chariman Arvind Jadhav.
Faced with a Rs 60,000 crore (Rs 600 billion) debt, Air India is in talks with the government for equity infusion and a soft loan even as it began a major cost-cutting exercise, which includes the launch of a low-cost domestic service this September.
Aiming at a turnaround in the next 2-3 years, with initiatives like starting special business units in areas such as maintenance, repair and overhaul, cargo and ground-handling, Air India CMD Arvind Jadhav said the company was negotiating with banks and financial institutions to turn its high-cost debt of Rs 10,000-11,000 crore (Rs 100-110 billion) into low-cost.
However, the banks want the national carrier to get a comfort letter or a sovereign guarantee from the government to convert the high-cost debt into low-interest loans, he said.
"We have never written to the government for a bailout package . . . we have never talked of waiver of ATF charges, waiver of taxes, waiver of penalties," he said.
"The airline had made a presentation to the government on the need for equity infusion and soft loan and the government is carrying out a financial analysis," Jadhav said.
Air India Express, the national carrier's low cost entity, will commence domestic operations from September with 27 per cent of Air India's existing routes that were not profitable, he said, adding ten additional aircraft would be deployed for this purpose.
Noting that current market pressures would continue over the next two-three years, Jadhav said AI would start preparing for an initial public offering in 2010-11 as well as additional fund offering in the next fiscal.
He said the national carrier was estimating an earning of Rs 180-200 crore (Rs 18-20 billion) through its low-cost operations on the domestic sector, which would 'improve our bottomline'.
Air India would gradually shift 70-75 per cent of its existing domestic operations to Air India Express, he said.
The airline will focus on high-density domestic and international routes and operate an 'aggressive' route restructuring to provide seamless connectivity, he said.
A cost management and audit team has been set up to look at AI's overall financial restructuring, including debt servicing, risk management, hedging and other related issues.
To questions on manpower rationalisation, he said the creation of SBUs relating to engineering, MRO and ground handling would lead to almost two-thirds of the 32,000 staff going out of airline operations, thus lowering the aircraft-to-employee ratio to match global standards.
Giving examples of Lufthansa and Singapore Airlines, Jadhav said the ground-handling subsidiaries accounted for almost 40 per cent of revenue of the parent company, whereas "we currently earn only two per cent".
On AI joining the Star Alliance, he said a single code for the two erstwhile airlines -- Air India (AI) and Indian Airlines (IC) -- would be put in place by next March. Internet engines will also be upgraded and integrated with the Star Alliance system.
Jadhav said in the past two decades, the company had acquired 41 aircraft worth $3 billion, entirely financed through internal resources and not by taxpayers' money.
He said several global carriers like British Airways, Japan Airlines, and China Southern had received financial support from their respective governments but Air India had not.
The erstwhile Air India and Indian Airlines had together contributed over Rs 4,500 crore (Rs 45 billion) by way of dividend, tax and duties.
In the recovery roadmap, the AI chief said employees' participation in the process was absolutely essential, and the unions had been made part of the Turnaround Committee, which would monitor the progress over the next three years.
This committee will deal with nine areas including route rationalisation, manpower rationalisation, operations and financial restructuring. "We are officially involving all the employees associations in the roadmap to recovery."
Observing that several world airlines had retrenched staff to meet losses, Jadhav said: "We are not issuing pink slips. We are trying to reduce costs" and added that some agreements with the unions were not within the parameters of the Department of Public Enterprises guidelines and therefore needed a review.
The unions were being consulted on all these issues, he added.
The airline, which is estimated to suffer a loss of Rs 7,200 crore (Rs 72 billion) in 2008-09, has been overburdened by its high cost working capital borrowings worth Rs 16,000 crore (Rs 160 billion). It has overdrafts from 15 banks.
A high-level Committee of Secretaries headed by Cabinet Secretary K M Chandrasekhar is vetting the ailing carrier's plans to cut cost and generate revenue. It would be holding its second review meeting at the end of this month.
US job losses drop; unemployment rate at 9.4%
The number of jobs lost in the United States came down sharply by 247,000 as the unemployment rate declined to 9.4 per cent in July, one of the strongest indications yet that recession in the world's largest economy is easing.
The job cuts were much less than expected and the unemployment rate dropped for the first time since April 2008. "Non-farm payroll employment continued to decline in July (-247,000), and the unemployment rate was little changed at 9.4 per cent," the US Bureau of Labor Statistics said in a statement on Friday.
Interestingly, estimates indicated that over 300,000 jobs would be lost and jobless rate would touch 9.6 per cent in July.
In June, the unemployment rate touched a 26-year high of 9.5 per cent and 443,000 jobs were shed during that month.
Since December 2007 -- when the economy officially entered into recession -- payroll employment has fallen by 6.7 million.
Spurring hopes of revival in the job market, the average monthly job loss for May through July stood at 331,000, nearly half the count of job cuts during the November to April period.
There were 14.5 million unemployed people in the country in July, the official data showed.
The Bureau of Labor Statistics' Commissioner Keith Hall said the employment-population ratio was 59.4 percent in July.
According to the latest information, unemployment rates for adult men was at 9.8 per cent last month, while it was 7.5 per cent for adult women, teenagers (23.8 per cent), whites (8.6 per cent) and blacks (14.5 per cent), among others.
The number of long-term unemployed people -- those who have been without a job for 27 weeks or more climbed 584,000 to 5 million.
"Total non-farm payroll employment declined by 247,000 in July. From May to July, job losses averaged 331,000 per month, compared with losses averaging 645,000 per month from November to April," the statement noted.
The encouraging figures just weeks after official figures showed that US economy shrank one per cent in the second quarter of 2009, much less than expected.
"The change in total non-farm payroll employment for May was revised from (-) 322,000 to (-) 303,000, and the change for June was revised from (-) 467,000 to (-) 443,000," the statement noted.
