Indian Cabinet approves turnaround plan for Air India
April 12, 2012, New Delhi, India - The Indian government approved a turnaround plan for Air India on Thursday that aimed to make the ailing national carrier profitable by 2020.
The once proud airline has become mired in debt in recent years as it struggled with the legacy of a poorly executed 2007 merger and a swollen work force.
Civil Aviation Minister Ajit Singh said a Cabinet committee agreed to give the airline 67.5 billion rupees ($1.3 billion) this year and a total of 300 billion rupees (about $6 billion) by 2020.
The money would be released in phases, however, and the airline would need to meet goals in on-time performance, passenger payload and other benchmarks before it would get the next installment of funding, he said.
In return, the government will turn the airlines' engineering and ground handling services — along with their thousands of employees — into two wholly owned subsidiaries. It will also demand costs be cut, including changes to employee benefits packages, Singh said.
"Air India has to rationalize their costs. They have to be in line with the industry norms otherwise the government cannot and will not continue to use public money to run Air India,'' he said.
Under the plan, banks also would restructure 180 billion rupees ($3.6 billion) of the airlines' more than 670 billion rupees ($13.4 billion) in debt.