India’s state-owned carrier Air India announced Sunday that it will implement methods to cut costs by about 6 percent of its total outlays, or by 14 billion rupees ($227 million), in the next financial year. The move comes after the Indian government asked the loss-making airline to take measures to improve its financial condition.
As part of its cost-cutting measures, Air India reportedly said, in a statement on Sunday, that it would identify "surplus staff," freeze contractual hiring and discontinue flights which don’t meet fuel cost targets. These steps will help the airline reduce its variable spending of 140 billion rupees by one-tenth, Reuters reported. According to a Press Trust of India (PTI) report citing anonymous sources, Air India plans to move a little over half of its 22,500 staff to subsidiaries dealing with engineering and ground-handling services. This move is expected to generate significant savings for the airline in payroll costs.
In addition, the carrier is also looking at putting restrictions on staff travel and paring budget for official events, Air India officials reportedly said.
"Stay in five-star hotels for pilots and cabin crew or holding official events has been restricted and is to be undertaken only if is completely unavoidable. The budget for such activities has been reduced by 10 per cent as part of the cost-cutting measures," a senior company official told Mail Today, a local news network, adding: “Hotels near airport also entail lower transport costs and the crew can reach the airport in a shorter time. This is also the practice of other airlines."
In 2012, the Indian government had handed Air India a $5.8 billion bailout package, with funds to be pumped into the company over a period of nine years. The clearance to the funds came despite several ministers being skeptical of the move.
“These cost-cutting measures are part of a two-pronged drive to speed up our return to the break-even status. The measures are aimed at cutting costs under all controllable account heads by nearly 10 per cent,” Air India officials said, according to PTI.