Air India to Restructure into a Low-Fare Carrier
Jun. 25 – India’s national carrier, Air India (AI), may restructure to become a low-cost carrier as a condition for a government bailout.
“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,” Aviation minister Praful Patel told the Times of India.
If the restructuring pushes through Air India will start offering low fares for its domestic routes. The company will only maintain its full services on some market segments that are sure to earn profit.
Switching AI’s business model to a low-cost carrier one stems from the success seen from budget airlines like Jet and Kingfisher. Despite the company’s merger with Indian Airlines, it is still not able to do a turnaround and post profits.
The airlines has already delayed it salaries to 31,000 employees for the month of June because of cash flow problems. It also requested that its top executives not receive their salaries for July in a bid to help the cash-strapped company.
For the period 2008-2009, AI posted a Rs 5,000 crore profit loss while its working capital requirement has been ballooning from Rs 2,369 crore in March to Rs 16,300 crore in May.
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