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Air India Express will be a low-cost carrier
Published on 15 Jul. 2009 12:24 AM IST
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Maintaining that low fare carriers were the need of the hour, Civil Aviation Minister Praful Patel Tuesday said national carrier Air India will launch its own low-cost carrier under the existing Air India Express, which currently flies to 14 international destinations. “Air India Express will be our low-cost carrier and it has to be given a meaningful role. The fact is low cost airlines are doing much better than legacy carriers,” Patel told Rajya Sabha, Indian parliament’s upper house. The minister, however, did not indicate when Air India Express would start operations as a low cost carrier, though officials said it would be in September. Patel said several foreign carriers such as Tiger Airways, Air Jazeera, Air Arabia and Silk Air will also operate as low-cost carriers. Referring to stake dilution in the national carrier, he said Air India would continue as a public sector unit and had no immediate divestment plans. “There was a move in 2002 during the NDA government for disinvestment in Air India but soon after our government took over in 2004, we decided to take a conscious decision against it,” the minister said in Rajya Sabha. Responding to concerns raised by members of the house on Air India’s mounting losses, Patel admitted the merger of Indian, the government’s erstwhile domestic carrier, with the then international airline Air India last year has not worked to expectations. “Merger has not worked to our satisfaction. The decision was taken after a well laid out check and balances. Employees should introspect,” he said. Patel said the merger was a detailed exercise, “done through a complete process where an Empowered Group of Ministers, the cabinet and departments concerned were involved” and was “approved by most of the employees”. He said before the merger, Air India and Indian Airlines had incurred a loss of Rs.541.3 crore and Rs. 230.97 crore respectively in 2006-07. “In 2007-08, the combined airline posted a loss of Rs.2,226 crore and during 2008-09, the expected loss is about Rs.5,000 crore. The accumulated losses of NACIL (Air India’s holding company) as on March 31 this year is likely to be in the range of Rs.7,200 crore,” Patel said. Govt makes it mandatory for babus to fly AI Cash-strapped Air India has been given a huge captive market. The finance ministry on Monday made it mandatory for all government officials to fly Air India while travelling on work, on both domestic and international sectors. If babus are headed for a place not connected by AI, they will now have to fly to the point closest to the destination that’s served by the Maharaja. Thereafter, they can take any other airline, but preferably one that has a tie-up with AI. And if an official, for lack of connectivity or seat availability, has to fly some other airline, he or she would need to take clearance from the aviation ministry, which had sought this rule change for babus three months back to help the cash-strapped AI. ‘‘In all cases of air travel, both domestic and international, where the government of India bears the cost of air passage, the officials concerned may travel only by Air India,’’ the finmin’s official memorandum, which also applies to autonomous bodies funded by the government, said. According to Times News Network, with this virtual bailout, the government has reversed its own decision taken about three years ago. Back then, the government changed its fly-AI-only rule as part of an ‘‘austerity drive’’ so that the exchequer could get the best possible fares from whichever airline. The new finmin directive may not have hurt government travellers, had AI been able to join Star Alliance, the world’s largest airline tie-up, as per schedule last year. It would then have been able to give almost seamless connections to different parts of the world on partner airlines. Integrating the AI and IC codes of Air India and Indian Airlines was a vital precondition for joining Star. ‘‘This project, also a vital part of merger, has been put on fast track. Meanwhile, we are increasing our code share agreements with other airlines,’’ said a senior AI official. The merger and code integration delay could cost AI dear as Naresh Goyal’s Jet Airways is learnt to be waiting in the wings to be the first Indian airline to become part of the Lufthansa-headed global alliance. With combined losses of Rs 7,200 crore and a huge debt liability with new planes joining its fleet, Air India is likely to seek a bailout of close to Rs 5,000-10,000 crore from the government in the form of equity infusion and soft loans. The first tranche could well be the transfer of huge government travel business to AI.

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