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Air India to do away with business class

Mumbai, Aug 26 (): Air India, India’s oldest airline is cutting down business class seats and soon go in for all economy seats, sell land and properties that it owns and creating new companies for engineering and ground handling divisions of the carrier. The airline will receive Rs 30,000 crore to cover the losses of the six year operations . The carrier has Rs 40,000 crore debt.

As a plan to cover the bailout, Air India will have only economy class in the A320 aircraft it will lose. Business class seats take more space and by doing away with this each flight will have 180 seats. 25% of the business class will be reduced in existing flights. The idea is to offer full service at low cost airline rates. This will bring down the loss of Rs 5100 crore of last year to Rs 3900 crore as it will get Rs 1040 crore in this fiscal. In 2011-2012 it had Rs 7100 crore loss.

Indian airline companies will have a $450 million loss and the biggest loss is for Air India. The finance ministry plan to bring around AI was that it should maintain 85% on time performance and this is being maintained. The fleet utilization was below the 15 hour target and in Q1 it had overshot the target of 69.5% to 72.1%.

Dreamliner planes grounding did affect the airlines. Around 7400 employees out of the 28,000 will now be part of a new company that will look after engineering. This company will handle outside work of other airlines. It needs Rs 1200 crore to give VRS to 5000 employees but it has no funds. Yearly salary payouts are Rs 3200 crore. Eight floors of AI office in Mumbai will go to the SBI and BOI as lease and from Delhi office property it will get Rs 750 crore. In Q1 it had $75 million cash surplus. To compete with Jet who will route flights to the US, Europe and Australia through Etihad’s hub in Abu Dhabi, AI will give nonstop flights from Delhi to these countries.