Air India receives government lifeline

International India's crisis-hit national airline, Air India, received an emergency lifeline Saturday.

India's crisis-hit national airline, Air India, received an emergency lifeline Saturday after it presented its recovery plan to the country's government. The company has been given an extra three months to pay off its rising fuel bills and the finance ministry has been ordered to draw up a bailout package. Air India's managing director, Arvind Jadhav, met a committee headed by India's top civil servant, KM Chandrasekhar], to ask the government to inject as much as 100 billion rupees (Dh7.6bn) of new equity into the airline. Air India is estimated to be losing US$50 million (Dh183.4m) a month and its struggle to pay off its $4bn debt pile has become a -national crisis. The extra time granted to the airline to pay its fuel bills came despite opposition from India's Petroleum Ministry, which has demanded prompt payment for Air India's arrears to state-owned refiners, which had already passed $110m more than three months ago. The government stressed that Air India's holding company, National Aviation Company of India (NACIL), would have to make dramatic cost reductions as a price for receiving bail out money. "Any assistance from the government would have to be matched by an aggressive cost reduction and a better revenue management by NACIL," it said in its statement after the meeting. In particular, the statement called on Air India to scrap its controversial incentive scheme, which comes to almost 45 per cent of the company's 30bn rupees wage bill, and has been used to inflate the take-home pay of Air India's executives well above that received by other public sector employees in India. The airline has also been required to appoint an external cost auditor immediately, who will make sure that the cost savings the airline is outlining are achieved. Raajeev Batra, who covers transport at the business advisory firm KPMG, said: "This statement further reiterates the government's commitment to bail out Air India, provided the airline puts its house in order. There is an immediate need for the airline to revisit its business operating model and service philosophy." The committee, which included top civil servants from across the government, will meet again at the end of next month. Air India is expected to announce shortly both a new board, which is expected to include respected Indian business figures, and a new international advisory committee, which will include senior global aviation executives. The leadership at the company, which is predominantly drawn from India's civil service, has been criticised for lacking industry expertise. [e-mail]