Banks turn heat on Air India: tighten belt or else.

New Delhi, Oct. 15 -- Bankers have turned the screws on Air India and the message is clear: to get desperately needed working capital to run its day-to-day operations, the bleeding state-run carrier, must tighten its belt. Air India has an annual working capital bill of Rs. 16,000 crore.

"An increase in the working capital will depend on the kind of cost cuts that the airlines implements," a senior official in the ministry of civil aviation, who is not authorised to speak to the Press told Hindustan Times.

He said the banks approached by the airline to ease terms on its Rs 11,000-crore high-cost debt will keenly watch ongoing negotiations between trade unions and managers to cut costs.

"Even the banks would toe the government line," the official said.

A committee of officials in the ministry of civil aviation is negotiating with the 12 different unions of Air India to find out ways to reduce costs to pull it out of the financial ill health that it is in.

Air India has a debt of Rs 15,000 crore and a bank overdraft of Rs 16,000 crore. It pays Rs 4.7 crore per day as interest.

"The cost platform has to be reduced. I think the staff cost is a controllable expenditure. Other expenses like landing and navigation fees (which is levied by the airports), passenger amenities, agency commissions and lease rentals are areas there we will not be able to cut cost as these are fixed," an Air India official said on being asked what were the areas where the airline could bring down its costs.