Air India Set to Receive $1.1 Billion Government Bailout

In return for a reduction in costs over the next two years of 30 billion rupees ($650 million) the Indian government has agreed to a 50 billion rupees ($1.1 billion) phased bailout of the national carrier Air India.

Praful Patel, the Indian Minister for Civil Aviation, told a news conference in Mumbai, the country's commercial center, that the bailout of Air India, Asia's 16th largest airline, would see him appoint seven independent directors to the board of the national carrier in an attempt to improve its efficiency. As AFP reports, in addition to the cost-cutting exercise that Air India must undertake in order to qualify for the funds from the government the aim is to grow the airline's revenue by 20 billion rupees ($434 million) during the next two years, an increase in marketing activities being seen as a way in which more customers might be persuaded to use the airline. The BBC notes that Air India made a loss in the year to March of $875 million and AFP confirms that during the same month the loss was announced, September, the airline unveiled plans to cut the performance-related pay of more than 7,000 employees. Senior management were amongst those affected by the plans, which would see pay cut by as much as 50 percent. However the introduction of the cuts was halted when senior pilots with Air India staged a five-day strike. Pay cuts are still likely to form some part of Air India's cost-cutting exercise but at present a committee that includes Air India chairman Arvind Jadhav and senior Aviation Ministry officials is looking at the various issues associated with such cuts. Indeed, before addressing the news conference, Mr Patel, himself a former director of India's second largest airline Jet Airways, met with officials from the staff unions at Air India. According to the BBC Mr Patel told reporters that the unions were "very understanding" and "aware of the problems" facing the airline, AFP stating too that the unions realize "certain cost-cutting measures are inevitable". Mr Patel, a member of the Nationalist Congress Party, which in turn is a member of the governing United Progressive Alliance in India, has reportedly indicated that in the most recent months Air India has seen an upturn in business.