Air India’s billion-dollar lifeline a waste of money: trade sources

THE Indian government announced last week it would be injecting Rs60 billion (US$1.1 billion) into the floundering Air India, although industry insiders TTG Asia e-Daily spoke to likened the move to flogging a dead horse.

Air India will receive Rs20 billion by January 2013 and the balance in 2Q2013, to go into its working capital and fund new aircraft purchases. The financial boost is part of the Indian government’s Rs300 billion bailout plan for the national carrier, which will be paid out in phases until 2020-21.

Earlier this year, the government cajoled a consortium of lending banks led by the State Bank of India to restructure Air India’s debt into long-term instruments and interests totalling Rs180 billion. The carrier’s debts and accumulated losses stand at Rs437.8 billion.

But some travel trade players are sceptical about the effectiveness of the plan.

Kapil Berera, CEO, Astral Travels and general secretary of the Society of Foreign Travel Operators, said: “No amount of fresh funds will turn around Air India as it has more employees than required, which affects its fixed cost. Its fleet utilisation is below par and its management-employee relationships are in tatters.”

“We cannot afford to spend good money on a bad asset. Air India is a business venture – if it does not make money it should be allowed to die.”

Ashwani Gupta, managing director, Dove Travels, said: “There are too many maladies that the airline suffers from, like the wastage of money through unprofessional management, an excessive number of employees on payroll and the lack of a sustainable, long-term strategy.”

Joy Peter, Intersight Tours director, was critical of Air India’s handling of its Middle Eastern routes, saying: “Air India has messed up its predominant position in high-yield routes to the Gulf countries. The co-existence of a full-service airline and LCC (Air India Express) has been mismanaged. If a professional management, not susceptible to government interference in operations, is brought in, Air India may have a slim chance of survival.”

Sponsored Post