Indian cabinet clears Air India turnaround plan

The Indian government on Thursday approved a restructuring plan aimed at turning around the fortunes of debt-laden national carrier Air India that makes a loss of nearly $2.0 million a day.

"The cabinet has cleared Air India's restructuring plan," Civil Aviation Minister Ajit Singh told reporters in New Delhi.

At the same time the cabinet postponed a decision on allowing foreign airlines to buy stakes in struggling Indian carriers.

The Air India plan includes the restructuring of close to $4.0 billion of debt and a committed equity infusion of nearly $6.0 billion by the government over the next eight years.

"But there are many checkpoints," Singh said.

"It will be a performance-based incentive. We will monitor the performance.

"Let us be very clear, Air India will have to rationalise its process in line with the industry norms otherwise the government will not and cannot use public money on Air India indefinitely," he added.

The country's fourth-largest airline by market share has been hit hard by rising fuel prices and fierce competition, which have added to its legacy of labour problems and crushing debts.

Last month, Singh said the carrier was making a loss of nearly 100 million rupees ($1.9 million) every day.

Air India has been in the red since 2007, when it merged with domestic carrier Indian Airlines, and has seen its overall share of passenger traffic fall due to competition from private, low-cost airlines.

In a bid to help the distressed state carrier, the finance ministry in 2009 asked all government officials to use Air India for all their domestic and international trips.

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