New Delhi: Prime Minister Manmohan Singh has given Air India 18 months to spruce up its finances, come out of the red and report a profit. In a directive last week, he asked the carrier to close all its offices in cities at home and abroad where it does not fly. Instead, it has been asked to consider low-cost options like roping in associates and direct selling agents in these cities.

"The Prime Minister will review steps taken by the airline and its performance every six months," an Official at the Prime Minister's Office (PMO) told Financial Chronicle. The carrier has taken some measures to save capital costs. It has already shut down offices in San Francisco and Oakland; a decision on the Sydney office is yet to be taken. At home, it has shut offices in Gurgaon, Agra and Dehradun. More may be shut, including the one at Ludhiana. It has dropped the idea of opening an office in Noida. "The company is recalling all its executive directors in overseas offices," an official of the airline said.

Confirming the move, the carrier's spokesperson said, "Offices for which lease agreements have expired have already shut." The carrier has over 30 loss-making routes, the worst being New Delhi-New York and Mumbai-New York. Each of these two routes entails a monthly loss of up to Rs. 70 crore because of low yields. "These two are our premium products but aviation being a highly price sensitive sector, we have to match fares of our competitors. We plan to reduce capacity by 10 to 20 percent," said another official.

The carrier is also trying to trim its fleet to 95 from 133, it will be done in phases. For starters, it will sell five aircrafts, put on lease another seven and return 16 leased large-bodied and five narrow-bodied planes. Originally, the shedding was planned to be done by January 2011, but may have to be hastened after the Prime Minister's directive.