The government is not keen on unconditionally bailing Air India out of its financial crisis and

instead wants the bleeding national carrier to first take long-term restructuring steps.

Civil Aviation Minister Praful Patel met Prime Minister Manmohan Singh on Wednesday to
discuss steps to revive the airline. Sources told Headlines Today that Singh wasn't too keen
on the Rs 15,000-crore bailout package sought by the airline.

"Unless measures are taken to improve the functioning and financial viability of the airline, it
will be difficult for the government to continue its support unconditionally," Patel said.

Patel hinted at a possible disinvestment of Air India to tide over the financial crisis, but such
an option would be considered only when the company attains financial soundness after
restructuring.

Sources said Air India has been asked to submit a fresh restructuring proposal before a
bailout can be considered.

Air India is a textbook case of a badly-managed company. Its working capital in May 2009
was Rs 16,500 crore while its annual turnover is just Rs 15,000 crore. Anywhere in the world,
such a company would've gone bankrupt and be forced to declare insolvency.

Air India's accumulated losses till May 2009 amount to Rs 7,200 crore. Its market share has
fallen by 9 per cent in the domestic sector and 5 per cent internationally.

According to aviation expert Ankur Bhatia, the financial mess could have a lot to do with the
way Air India and Indian Airlines were merged into one entity. "The way the merger was
planned and the gaps that existed are something to look at in retrospect," Bhatia said.

That's not all. Air India is overstaffed by 50 per cent. Patel said there was an absolute need to
cut excess flab and restructure staff salaries for the airline's long-term sustenance. He also
warned workers against resorting to strikes as this would only hurt their interests.
Management and finances of Air India to be
revamped

The Ministry of Civil Aviation has lined up a series of initiatives to revamp the top
management of the national carrier, Air India and shore up its finances. Praful Patel,
Minister of State for Civil Aviation, Is all set to bring about transformational changes in the
management of the airline from the top. This will involve bringing in independent directors,
having a professional Chief Operating Officer to assist the CMD and appointing an
international advisory agency to turn the airlines around.

The government has appointed SBI caps to suggest a road map for the financial restructuring
of Air India in the short and medium term. Patel who dismissed the criticism against the
government for alleged interference in the day-to-day management of Air India, insists
"there is no regulation, no interference in managing the company." The high cost structure,
certain inefficiencies and compulsions of the PSU airline have been engaging the mind of the
government and that is why, says Patel, "we feel there is a need to bring about a
transformation in the work ethic and ethos of the company."

While the government was doing its bit to put the airlines on an even keel, it also expected an
equal amount of enthusiasm and commitment from within the organization. The government
was also committed to taking initiatives to make the Indian skies safer, declaring that the
vacancies in ATCs and safety issues would be adequately addressed. "All the backlog of
vacancies of ATCOs will be filled," promises Patel. The government would extend the
Mumbai and Delhi airport development models to the 80-odd airports that are currently
financially non-viable and continue efforts to persuade the state governments to reduce the
taxation on ATF and urge them to take the lead provided by Andhra Pradesh.

The Government is keen for carriers in India to transition from full service carriers to low
cost ones. This would be reflected both in terms of the number of people carried and the
operating costs. Patel will open the 5-day India Aviation 2010 in Hyderabad being partnered
by France and is supported by Airports Authority of India, Directorate General of Civil
Aviation, Air India and Pawan Hans Helicopters Ltd. The mega event has USA as the Focus
Country and Farnborough International as the Overseas Associate. The event also has the
support of the US Commercial Service of the US Department of Commerce and AMCHAM
India.
The government on Thursday ruled out disinvestment of Air India (AI) and Airports
Authority of India (AAI).

"There is no proposal for disinvestment of AI and AAI," Civil Aviation Minister Praful Patel
told the Lok Sabha during Question Hour.

To a question whether the government was considering Initial Public Offer (IPO) for the
national carrier, Patel said "Presently, there is no such proposal."

When members raised the issue of development fees being levied in privatised airports such
as in Delhi and sought abolition of such fees, he said the government had already constituted
the Airport Economic Regulatory Authority (AERA) entrusted with the responsibility of
deciding on the issue.

Members pointed out that while it was the responsibility of private players to develop the
airports, they were charging the passengers for the work.

Revamp of Air India brass in 30 days: Patel

PTI

Taking aggressive steps to turn around cash-strapped Air India in two years, government on
Tuesday said a major revamp of its top management would be carried out in 30 days and
there would be a partial disinvestment of the national carrier in the near future.

"You will see in the next 30 days a major change in the top management in Air India. You are
going to see a major change in the board. Some heads are going to roll.

"We are going to bring high quality people of great integrity and people with a proven track
record in business," Civil Aviation Minister Praful Patel said.

The minister's remarks came amid reports that the national carrier was expecting an
estimated loss of about Rs 5,000 crore in the 2008-09 financial year.

Civil aviation ministry sources said at least seven independent directors, who are
internationally reputed, would be inducted on the board.

A global advertisement will also be put out for a new chief operating officer for Air India, the
sources said. Air India does not have such a post at present.

Apart from revamping the board, government would go in for "partial disinvestment" of the
state-owned carrier in he near future, they said, adding that the plan was to ensure a full
turnaround for the carrier in the next 24 months.
Patel had earlier said that the airline could go for issuing initial public offer (IPO) when its
financial position as well as the stock market situation is stabilised.

Air India targets turnaround in 3 years

New Delhi: Air India on Friday announced an ambitious plan to return to profitability and maintain
its status as the biggest airline in India. The plan includes an IPO and selling old planes out.

The Chief Managing Director of Air India, Arvind Jadhav, in a press conference, said that Air India
will be back in profit after 36 months. He also said that the company will come up with an IPO in
the next 18 months.

Among the revamp plans is launching a domestic low cost airline in nine months’ time and re-
evaluating aircraft purchase and financing processes.

Air India will also restructure existing debt and fleet

rationalization particularly matching capacity with the availability of demand. This may of course
mean selling off some aircraft.

Related Stories
AI Express to deploy 10 more aircraft for domestic ops
The target is also to ensure the phasing out of old aircrafts and returning of the leased ones,
Jadhav said.

Considering that the market pressure would not cease before the next 2-3 years, the CMD stated
that despite the loss making position, “we still see passengers coming to us.”

Among the vital points that he made were that flight delays will be tackled to be reduced to
minutes.

Jadhav sounded proud about the fact that ever since he had been appointed as the head of the
airline, not even a single letter had been written to the government asking for a single penny let
alone a bail out package.

Air India faces a financial crisis after posting an estimated USD 1bn loss for the fiscal year ended
March 31. "There is a lot of excess flab on the entire body of Air India," Civil Aviation Minister
Praful Patel had said recently.

Air India, which is estimated to suffer a loss of Rs 7,200 crore in 2008-09, has been
overburdened by its working capital borrowings worth Rs 17,000 crore. It has overdrafts from 15
banks.

At the first meeting on its financial restructuring last month, Air India had sought government's
urgent help and urged for equity infusion of about Rs 2,500 crore and a soft loan of Rs 10,000
crore for five years. While the government may make only a partial contribution, a major part of
this package will be is likely to be through partial disinvestment of government equity or issuance
of initial public offer, sources had told earlier.