Odisha News Insight

Air India Announces to Cut Costs by Rs.1,400 crore

Air IndiaIn order to maintain a healthy balance sheet, state-owned passenger carrier Air India plans to cut its total expenses by Rs.1,400 crore in the coming financial year. In a circular issued to all employees Sunday, the flag carrier plans to stop hiring all non-essential staff, curbing transfers, field visits and holding meetings and conferences in five star hotels. The circular asked employees to return immediately from outstation assignments to save on hotel and other costs. Employees have also been informed that nearly 10 percent of their reimbursement amounts will be deducted to let the airline remain afloat.

Wages owned on account of extra time will also be reduced. No new vehicles, office machinery and non-essential items will be bought. Immediate sales of old computers and other items have been mandated. “These steps will ensure fiscal discipline within the airlines. All these restrictions are imposed on everyone right from the chairman to the lower staff,” a senior Air India official told in New Delhi. “The airline will stand to benefit enormously from these initiatives. Not only costs born on account of travel, but hotel rents are expected to be reduced.”

The airline has also been advised to use less space at major airports like Delhi and Mumbai to reduce rentals. The staff has also been advised to curtail outstation travel, engineers have been asked to service aircraft at only major stations and airport managers are to identify extra manpower that can be asked to go. Costs on account of promotional activities, freebies and entertainment allowances will also be reduced.

“The move has been initiated in consultation with the ministry and fits well with our turnaround plan,” said the official in the know of the development. The airline ended the last fiscal with a positive EBITDA (earnings before tax, interest, depreciation and amortization) of Rs.65 crore on the back of higher passenger revenue and yield as well as passenger numbers. On April 12, 2012, the beleaguered flag carrier got a new lease of life when the government approved the turnaround and financial restructuring plans for Air India.

The multi-billion-dollar bailout came with stringent riders like on-time performance, maintaining healthy load factors and hiving-off maintenance, repair and overhaul as well as ground handling businesses. The company is expected to make cash profits from 2018, but it will take time to earn net profit or the actual profit. Air India borrowed Rs.21,412 crore to buy new aircraft and Rs.22,368 crore as working capital. Its current losses stand at Rs.22,000 crore. (IANS)

Leave a comment