Poor A-I readies contingency plan

AI8217;s wage bill is a whopping Rs 46 crore per month and the management hopes to save a substantial amount by offering IOUs though it was not disclosed at the meeting what percentage of the salary will be thus held back.

The mood among the 200 or so executives was sombre as they marched into the conference room of the airline8217;s inflight services department building near Mumbai airport. 8220;We expected something like this as the company8217;s financial position is very precarious,8221; said a veteran A-I manager who attended the meeting.

At the two-hour-long meeting, A-I8217;s top brass from personnel, finance and marketing departments made presentations to inform its executives about the dire financial position of the company. They were told that the airline continued to make losses which amounted to Rs 62 crore in the first six months of the current financial year. Though this is far less than the Rs 1 crore per day loss suffered in 1995-96, the accumulated losses of the airline have pushed it deeply in the red.

Mascarenhas himself admitted during the presentation that A-I8217;s debt to capital ratio was 5.6:1. In other words, for every Rs 100 worth of capital, A-I has debts of Rs 560. This is considered too high in the airline business where the ideal debt-capital ratio is pegged at 2:1, say A-I sources. A-I8217;s top brass however insisted that the airline8217;s external liabilities will be met promptly. A-I8217;s crisis management team informed the executives that the airline had exhausted all possible sources of finance. Just recently A-I borrowed Rs 150 crore at an annual interest of 16 per cent from a public sector undertaking only for paying salaries and allowances for the month of October.

Incidentally, A-I8217;s retired employees have been badly affected by the cash crunch. Many who retired in 1994-95 were paid their pension arrears only today, sources said. However, in an effort to maintain industrial peace, Mascarenhas informed that the agreements signed 18 months ago, particularly the controversial productivity-linked incentives which gave employees a 100-300 per cent pay hike, would be fully honoured. But all payments may have to be made in the form of IOUs if the situation so warranted, he reportedly said. According to sources, A-I8217;s fate now hangs by a slender thread. Under the much-delayed revival package now under implementation, A-I has withdrawn all discount and price-cutting offers.

Fares have been increased on selected sectors and more of its aircraft are being deployed on revenue earning sectors in order to maximise its profits. Other measures include slashing expenses in A-I8217;s non-operational areas. For instance, the airline has already given up rented property in New Delhi and has shifted operations to its own premises at the airport and some top executives, including Mascarenhas, have taken a voluntary cut in pay.

According to A-I8217;s spokesman Jitendra Bhargava, these measures would help save the airline Rs 30-40 crore annually.

8220;Between July and September our losses fell to Rs 23 crore from Rs 37 crore in the April-June period. We are confident that we will break even in the next few months,8221; Bhargava said.