Air India chief comes clean on losses

EXCLUSIVE: CMD's letter to pilots

sweta-ranjan

Sweta Ranjan | June 3, 2011




How deep in the red is national carrier Air India has been revealed by the chief of the ailing airline in a letter to its pilots.

For the first time in recent years, the CMD of Air India has accepted the extent of financial crisis the national carrier is facing every day. The figures are shocking: the Maharaja is burdened with a monthly deficit of nearly Rs 550 crore. That means the AI is facing an annual deficit of Rs6,600 crore. "The oil companies have put us on cash-and-carry and we have to pay them Rs 16.5 crore everyday to ensure operation of our scheduled flights," Jadhav admits in the letter dated June 1, and adds. "There are other suppliers, vendors and facilitators whose payments have not been made. These dues are both increasing and accumulating."

Jadhav also indirectly blames the decision of the acquisition of aircraft. The letter reads, “Repayment of principal and interest to international financial institutions, which provided funds for acquisition of aircraft, has to be paid. Around Rs 9 crore is our daily interest outgo.” That means the beleaguered carrier has to pay a monthly interest of Rs 108 crore for the acquisition of aircraft.

Jadhav acknowledges through his letter that due to its liquidity crunch the management is finding it difficult to pay Performance Linked Incentives (PLI) to its pilots who had been on a 10-day strike recently. “The letter indicates that the management is demanding a sacrifice from the pilots by giving up their PLI,” says a pilot. But in the letter the CMD has not mentioned anywhere the reasons for the delay in the salary of the pilots who have not been paid their flying allowances since March 2011.

The letter from the CMD also talks of maximizing the revenues, improving profits, eliminating wastage/losses and ensuring customers are well taken care of. At a time when Air India is gasping for breath, Jadhav is talking of the need to work harder and ensuring 10:10:10 mantra – 10 % reduce costs, 10 % revenue enhancement and 10 % improve in efficiency – is a huge success. The letter boasts of realising the targets of enhancing revenues, “Our target to reduce costs by Rs 4,000 crore and to enhance revenue by Rs 5,000 crore has to be realised.”


Here's the letter:

Dear Colleagues

Greetings

As you are aware, our company is facing a very serious liquidity crunch on account of loss of revenue from 27th April to 10 May 2011. It will take considerable time to ramp up the revenues. It has not been possible to pay your Performance Linked Incentives (PLI) in the month of May. The oil companies have put us on cash-and-carry and we have to pay them Rs 16.5 crore everyday to ensure operation of our scheduled flights.

There are other suppliers, vendors and facilitators whose payments have not been made. These dues are both increasing and accumulating. Repayment of principal and interest to international financial institutions, which provided funds for acquisition of aircraft, has to be paid. Around Rs 9 crore is our daily interest outgo. At the moment we are facing a monthly deficit of nearly Rs 550 crores.

We need to be “united” and be “determined” to overcome the ongoing crisis. I thank you all for your persistence, patience, sincerity and support to the company’s effort to take the 15 March 2011 Board approved Turnaround and Financial Restructuring Plan to its logical conclusion.

But what is crucial is to have the hunger / desire to ‘earn more’. It is imperative on each and every one of us to ensure that we not only operate all of our scheduled flights but also leave no stone unturned to achieve better yields, passenger load factor and revenues. There is no alternative but to maximise our revenues, improve our profits, eliminate the wastage/losses and ensure customers are well taken care of.

We therefore need to work harder and with a missionary zeal. We have to become self-reliant. We have to ensure that the 10:10:10 mantra – 10 % reduce costs, 10 % revenue enhancement and 10 % improve in efficiency – is a huge success. Our target to reduce costs by Rs 4000 crore and to enhance revenue by Rs 5000 crore has to be realised.

We also have to remain motivated while ensuring that we don’t allow the ‘give-up’ attitude to creep in. So let’s together face and overcome the ongoing crisis. Let’s prove our detractors wrong. We have to win and we will win.

Yours truly

Arvind Jadhav

1.6.2011

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