Govt says ready to back Air India with $1.1 billion

MUMBAI (Reuters) – The government has agreed to back Air India with up to 50 billion rupees ($1.1 billion) if the ailing state-run carrier finds the same amount in costs cuts and extra revenue, the aviation minister said on Wednesday.

The airline lost $875 million in the fiscal year ended March and has sought a government bailout.

Hundreds of Air India pilots went on strike in September to protest management plans to cut pay incentives. The strike was called off when aviation minister Praful Patel said the grievances would be dealt with.

“The government has demonstrated its sincerity and agreed to an equity infusion… of 50 billion rupees,” Patel said after a meeting with Air India management and unions.

The airline must cut costs by 30 billion rupees and raise revenue by 20 billion in the next two years, he said.

When asked about possible wage cuts, Patel said “it is only one aspect of cost cutting.”

He said Air India employees were willing to co-operate with management to “forge a way out of the current crisis.”

Air traffic has shown an uptrend in the last month and is showing some signs of a recovery, Patel said.