The Maharaja's bleeding big time

The National Aviation Company of India Ltd (NACIL), has accumulated losses of Rs 7,200 crore till this March. The AI-IA combine is to receive 111 new aircraft worth $11 billion (list price) to replace decades-old planes in its fleet. Until now, 51 new planes worth $4 billion have joined the fleet. But in this slowdown when all airlines have been badly hit, AI, which has been struggling for some years, was even more affected and needs a massive cash infusion from the exchequer to stay in air. Armed with a plan for cost-cutting and revenue enhancement, AI chief Arvind Jadhav met the CoS that has finance and aviation secretaries Ashok Chawla and M M Nambiar as members to seek the bailout. The CoS was set up to examine issues related to the national carrier following a meeting Prime Minister Manmohan Singh had with Praful Patel last month. During the two-hour meeting, a presentation was made to the high-powered panel by the ministry and SBI Caps on financial restructuring that basically means cost-cutting and enhancing revenue. The airline also told the panel that it needed new aircraft to phase out the old ones in its fleet to be able to compete. NACIL said it will reduce its annual wage bill of Rs 3,100 crore by finding a low cost alternative to the performancelinked incentive that employees get and which accounts for nearly half of the total wage bill. The CoS asked NACIL to immediately appoint a cost auditor. They have presented an annual cost-cutting plan but that was not specific. AI has to come up with a more detailed plan, possibly with quarterly benchmarks, whose progress can be monitored. The challenge for the airline would be no to draw up but effectively implement any plan, said sources, possibly alluding to the ministry’s grand plan of merging AI and IA to create a mega airline. While the merger plan prepared by Accenture was near perfect on paper, its implementation has been a near disaster.