AI to Ground Loss-making Routes, Cut Costs

In a bid to get itself out of financial trouble, government carrier Air India plans to introduce a range of measures to reduce its operational costs.

Published: 19th January 2015 06:00 AM  |   Last Updated: 19th January 2015 08:10 AM   |  A+A-


BENGALURU: In a bid to get itself out of financial trouble, government carrier Air India plans to introduce a range of measures to reduce its operational costs. These include a move to cut reimbursibles by 10 per cent as well as a rethink of loss making routes.

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Air India Announces a Slew of Cost-Cutting Measures  

Riding on an increase in passenger numbers and cargo revenue, the loss-making carrier had recently declared a profit of Rs.14.6 crore in December 2014. The increase in revenue was a modest 6.5 per cent and stood at Rs.2,070 crore in December.

AI to Ground.JPGThe airline now further plans on boosting profits by removing staff positions and posts in areas where it does not operate. With the net loss decreasing to Rs.5,389 crore in the last financial year compared with a figure of Rs.7,559.74 crore in FY12, the plan clearly is to break even.

Other measures include the stopping of loss-making routes, restrictions on the use of expensive hotels for stays or events as well as cutting of the expense budget by 10 per cent. On Sunday, news agencies quoted sources as saying that the aim was to cut costs under all controllable account heads by nearly 10 per cent.

The government along with Air India had earlier taken a policy decision to transfer aircraft and service engineers to a separate company called Air India Engineering Services.

That announcement was cited as part of the company’s ‘Turn Around Policy’ (TAP) and would mean that around 11,500 employees would be transferred to the new company’s payrolls leaving only 11,000 employees with the carrier. This would reduce the burden of salaries for Air India.

Other measures are being taken to ensure that the company achieves its targets set out in the  turn around policy. These include efficiency improvement, lesser turnaround times as well as regular reviews of loss making sectors and their discontinuation.

The airline is expected to save around 20-25 per cent of its fuel bills next year because of dropping fuel prices, news agencies quoted sources as saying.

In 2012, the government had granted the airline a bailout package of over Rs.30,000 crore which was linked to its performance.

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