Cash Crunch Forces Air India to Delay Paying Salaries

The National Aviation Company of India (Nacil), the company that operates Air India, has decided to defer the payment of June salary to its 31,000 employees by 15 days due to severe liquidity crunch.

Air India top officials—general manager levels and department heads—have got an email, stating that the salary will be delayed by 15 days. The e-mail will be forwarded by department heads to their colleagues this week, said a senior official.

An AI spokesperson, in a text message on Sunday evening, confirmed to ET that the June salary, due at the end of the month, will be paid on July 15. The company had submitted a proposal to the ministry recently asking for a bailout package, the spokesperson added.

It was further learnt that Air India top officials were asked to meet the civil aviation ministry before the budget to work out the final package the government will be sanctioning for Nacil.

Last week, Air India, had tabled a blueprint to the aviation ministry on how it will utilise the Rs 14,000-crore bailout package, if it's granted.

Another senior AI official said that Rs 14,000 crore package is necessary for the national carrier to run operations smoothly.

"We are not yet sure what the civil aviation ministry will finally approve in the budget," the official said on condition of anonymity. When asked about any likely layoffs, he said there's no layoffs plan as of now.

Incidentally, the decision on salary delay came after Air India CMD Arvind Jhadhav said that Nacil may have to take drastic steps to come out of the current situation. "We are trying to do a reality check, every group has to adopt some cost saving and revenue generation programmes," Mr Jhadhav added.

In May, the country's second-largest private carrier Jet Airways had sacked around 50 employees and referred them to an in-house out placement cell, which will help them find jobs with other airlines.

On the other hand, the fully government-owned company Nacil, covering the combined operations of Air India and Indian Airlines, has nearly doubled its losses to Rs 4,000 crore in FY09.

Industry trackers say AI has not been in the best of health and the government bailout is critical. The cost of acquiring 144 aircraft has shot up from Rs 45,000 crore to Rs 50,000 crore on account of currency fluctuations.

The company has borrowed close to Rs 15,000 crore, with a large chunk being utilised for funding the purchase of aircraft, according to the Centre for Asia Pacific Aviation (Capa). Civil aviation minister Praful Patel earlier said that government would look at the partial divestment of Air India with an initial public offering (IPO) being an option in the second half of next calendar year.

International Air Transport Association revised its airline financial forecast for 2009 to a global loss of $9 billion, nearly double the March estimate of a $4.7-billion loss.

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