Air India has appointed McKinsey as consultant to advise on firming up its long term strategic business plan. The consulting firm will give AI a detailed cash-flow based on the plan it prepares, which will focus on redrawing of network. It will also tell the national carrier how much global airlines of its size should be generating and advise on bridging the gap.
“McKinsey will also advise us on marketing strategies and help us bring our frequent flyer programme to global standards, said a senior AI official. The airline had shortlisted three firms -McKinsey Bain and EY -from a number of applicants on the basis of presentations made to the AI brass, following a tender inviting proposal issued last October.
The move to take a consultancy help in network planning comes at a time when the government has drawn up ambitious plan for AI. It has decided that AI, which currently has 118 planes, will almost double its fleet in next four years without burde ning the taxpayer-funded exchequer further. The airline will grow by leasing aircraft instead of purchasing them.
By March 31, 2020, AI group is looking at a fleet of 232 planes as some planes from the 111-aircraft order placed in 2006 are yet to be delivered. AI will take on lease 40 more Airbus A-320s for the erstwhile Indian Airlines that serves domestic and nearby international routes. It will order about 35 more turboprops.And AI Express, which currently has 17 Boeing 737s, will get 18 more B-737. The airline's total loan is about Rs 50,000 crore, of which Rs 28,000 crore is working capital loan at an interest rate of 10%. It is seeking to convert, whatever possible of this working capital loan to 7% LIC loan. Switching Rs 10,000 crore alone will lead to a saving of Rs 300 crore annually in debt servicing, the airline says. The annual debt servicing of Rs 4,000 crore remains a sore point with the airline.
Aviation minister Jayant Sinha is spearheading the effort to revive AI through innovative financing. He suggested that AI also speak to LIC for conversion of some high-cost loan to cheaper debt. A financial support of Rs 30,231 crore was approved for AI in 2012 of which it has received Rs 22,280 crore as equity infusion till March 2016.
Of AI's current fleet of 118 planes, 41 are wide body planes used on long haul and a handful domestic routes; 66 narrow body used on domestic and nearby international routes and 11regional jets.