January 2013

Air India’s (AI) performance in the first half of the current fiscal indicates that the national carrier is on track to meet the various norms laid down in the turnaround plan that were approved by the government in April. Various financial and operational restructuring currently underway would accrue substantial benefits and the airline seems determined to turn EBITDA positive by March 2013, said AI officials. On-time performance in the first half improved to 85 per cent from below 80 per cent in the first half last year. For domestic, it was 89 per cent (78 per cent) while international was 81 per cent (78 per cent). Passenger load factor improved to 70.9 per cent with the domestic services contributing substantially, the requirement being 69.5 per cent. AI has achieved a network yield of Rs. 4.31 per passenger km, with domestic yield of Rs. 6 and an international yield of Rs. 3.5, which is comparable with other full service carriers. On fleet utilisation, AI achieved an average utilisation of 10.9 hours for its Airbus fleet as compared to 10.50 hours set in the turnaround plan. The wide body fleet hit 13 hours utilisation as against 14 hours set in the turnaround plan.

The number of passengers in November showed a substantial increase, with an average of 46,300 passengers flying daily, of which 66 per cent were domestic passengers.

Productivity Linked Incentives have been abolished from July 1 and the airline has taken steps to operationalize the engineering and ground handling businesses with the appointment of SBI Caps as its advisors. Towards monetizing its real estate assets, DTZ has been appointed as global real estate consultant. The objective is to monetize Rs 500 crore a year with a target of Rs 5,000 crore in 10 years. The IT system has been upgraded. A voluntary retirement scheme (VRS) has been finalized at the board level and has been submitted to the ministry of civil aviation for approval. VRS is targeted at 5,000 surplus employees.

With 20,000 employees to be shifted to the ground handling and engineering businesses, the effective strength of the parent company would come down substantially. “The objective is to have an aircraft to employee ratio of 1:100,” an official said.

“Route rationalisation continues to be a significant part of our strategy to return to profitability.

“In the first half, domestic services contributed surplus of Rs.200 crore as compared to Rs.57 crore loss in the first half of last year. 65 per cent of the domestic routes contributed to higher yield,” said S Venkat, Director-Finance, Air India.

Through various cost reduction measures, AI has been able to bring down cost by nearly Rs.600 crore in the first half, officials said. The restructuring of working capital loan and non-convertible debenture issue will bring down AI’s interest burden substantially. AI’s short term loans will come down to Rs. 4,500 crore from Rs. 22,500 crore.

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