Air India to Reduce Losses but Cutting Costs

Air India to Reduce Losses but Cutting Costs

State-owned carrier Air India is to cuts its costs by Rs 1,400 crore ($227 million), or about 6 per cent of its total outlays, in the next financial year after the government asked the loss-making airline to improve its finances.

Air India, which controls close to a fifth of India’s domestic air travel market, has been losing money for years and has long been criticised for its high costs. In 2012, the government handed the company a $5.8 billion bailout package.

The airline said in a statement late on Sunday that it would identify “surplus staff”, freeze contractual hiring and discontinue flights which are not meeting fuel cost targets, to reduce its variable spending of 140 billion rupees by a tenth.

Restrictions on staff travel and hospitality have also been introduced, Air India said.

“Stay in five-star hotels for pilots and cabin crew or holding official events has been restricted and is to be undertaken only if is completely unavoidable. The budget for such activities has been reduced by 10 per cent as part of the cost-cutting measures,” a senior AI official. The crew has been asked to stay at hotels near airports. These hotels are good and much cheaper than the more expensive hotels. “We have also made arrangements with these hotels to serve Indian cuisine. Hotels near airport also entail lower transport costs and the crew can reach the airport in a shorter time. This is also the practice of other airlines,” the official added.

AI has a 22,500-strong workforce as against 33,000 at the time of merger of erstwhile international carrier Air India and Indian Airlines. Senior officials said once the hiving-off process of AI’s engineering and groundhandling subsidiaries get operational and some 11,500 employees are transferred to the these two companies, the airline would have only 11,000 employees by the next fiscal. This is expected to bring down the wage bill significantly.
All but one of the major carriers in India are losing money because of high operating costs and some of the lowest fare prices in the world amid intense competition.

Source: The economic times – India, Business Today

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