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Air India to cut costs by US$226.6 million

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State-owned carrier Air India is attempting to cut annual costs by 14 billion rupees (US$226.6 million) after the government ordered the loss-making airline to improve its finances.

[NEW DELHI] State-owned carrier Air India is attempting to cut annual costs by 14 billion rupees (US$226.6 million) after the government ordered the loss-making airline to improve its finances.

Air India said surplus staff should be identified and overtime and expenses slashed, while flights not meeting their fuel costs should be cut.

"The ministry of civil aviation has directed that a 10 percent cut be imposed..." said its chairman and managing director Robit Nandan in a circular to senior staff.

Staff travel and hospitality have also been restricted and "wage increases for local staff... will not be entertained" said the circular, dated January 15 and sent to AFP on Monday.

Air India, once the country's monopoly airline, has not reported an annual profit since 2007, and received a US$5.8 billion bailout package from the government in 2012.

The carrier now holds just 20 percent of the passenger market as once-loyal travellers fly nimbler private-sector rivals who last year were embroiled in a cut-throat price war.

Air India has also been keen to improve its reputation after a string of recent technical glitches, including in July last year when an India-bound flight from New Jersey in the US was forced to return when an engine caught fire.

Air India pared its financial losses last year thanks to a better all-round performance, reporting a net loss of 53.8 billion rupees (US$894 million).

All but one of India's main half-dozen carriers are losing money, smarting from fare rivalry, high fuel costs and hefty debts. Indigo is the exception.

AFP