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Air India postpones March salary to April 7

In the recent past, AI is deferring salary payments for the second time. In June 2009, it had postponed salaries by 15 days due to non-availability of funds.

TNN & Agencies|
Mar 27, 2010, 09.45 AM IST
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MUMBAI: Air India's cash-flow problem is worsening day-by-day. Now it is even failing to pay salaries in time. The airline has deferred payment of March salary to its employees by a week to April 7, instead of the normal practice of paying it within the month.

In the recent past, AI is deferring salary payments for the second time. In June 2009, it had postponed salaries by 15 days due to non-availability of funds.

The national carrier may also shelve its plans to hive off its cargo business as a separate entity and is likely to take a final call on the issue shortly, according to sources. The airline management was considering options that instead of setting up an independent subsidiary business unit and creating separate book of accounts, cargo should remain a unit within the NACIL (combined AI-IA), the sources said.

AI has over Rs 16,000 crore working capital borrowings on its balance sheet, coupled with around Rs 7,200 crore expected losses in the current financial year. Its borrowings have risen steeply from Rs 6,550 crore in November 2007 to Rs 15,241 crore in June 2009, primarily due to interest payments against aircraft acquisition.

The NACIL has been incurring losses since its inception with Rs 2,226 crore loss in 2007-08 and about Rs 5,500 crore loss in 2008-09. There was an entire range of tax issues involved in case NACIL decided to convert its cargo unit into a separate company, the sources said, but added that a final call on the issue was expected to be taken soon.

The airline had earlier announced plans to hive off its cargo business into an independent autonomous unit from April 1 this year to cater to the growing cargo market in the country. Based on the recommendations by consultancy firm Accenture, NACIL had decided to create six Strategic Business Units (SBUs) for its low-cost operation — AI Express, the cargo airline, MRO for components and airframe, ground handling and related businesses.
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