The Rs 30,000-cr bailout: Air India improves metrics but misses target

Air India
Air India’s performance has improved in the past two years but it has failed to meet critical targets set in a turnaround plan drawn up by the government.

The airline has principally failed to meet its target of bringing down the net loss to Rs 2,369 crore in 2016-17. The government in 2012 provided the airline a Rs 30,000 crore bailout on condition that it will meet specified operational milestones. 

Air India has submitted to the civil aviation ministry that it has increased core revenue, ancillary income and operating ratio in 2016-17 while trimming losses. In 2015-16, the airline posted an operational profit of Rs 105 crore, its first since its merger with Indian Airlines.  

In 2016-17, Air India has increased its revenue by almost 10 percent to Rs 22,521 crore by using capacity more efficiently. “We have improved our load factor to 76.4 per cent from 75 per cent last year. This may seem marginal, but consider the huge capacity deployment by private carriers on domestic routes,” an Air India executive said.

The airline has trimmed losses by 5.05 per cent to Rs 3,643 crore in 2016-17 from Rs 3,836 crore in 2015-16. “We managed to do this despite increase in fuel and landing charges,” the Air India executive. 

Air India’s fuel expenses rose to Rs 6,330 crore in 2016-17 from Rs 5,845.40 crore a year ago. “Staff costs increased by Rs 202 crore because of a wage award even though we rationalised staff strength as suggested,” the executive said.

Another airline executive said Air India’s interest outgo made it difficult to meet the targets. “Low-cost carriers started dominating with huge capacity and yields started dropping. We do not function like a private player, and there are multiple complexities to handle in regards to strategic decisions which do not exist for a private company,” the executive said.

Air India has consolidated its international network. It has doubled the frequency on the Delhi-San Francisco route, launched direct flights to Madrid and Vienna, and started Ahmedabad-London-Newark and Delhi-Cochin-Dubai flights. The airline has a market share of 13.6 per cent after private carriers IndiGo and Jet Airways.


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