The Hindu Business Line : Air India taxiing on recovery path

Air India, which reported a more than 10 per cent jump in the total revenue earned in 2003-04 compared tothe previous period, has taken several measures to improve its performance such as introducing attractive discounted fares for senior citizens and going in for dry leasing of aircraft to increase frequencies to existing stations.

IT WOULD seem that the Maharaja is clearly on the path of recovery. The airline, which has started the process of acquiring more aircraft to expand its services, reported a more than 10 per cent jump in the total revenue earned in 2003-04 compared to the previous period.

A review by the Government of the airlines' annual report for 2003-04 shows that Air India's total revenue from passengers, excess baggage, mail, cargo, charter and handling stood at Rs 6,236.44 crore up from Rs 5,657.87 crore previous year.

However, the profit before tax declined in 2003-04 compared to the previous year. While the airlines reported a profit before tax of Rs 112 crore in 2002-03 it declined to Rs 14.39 crore in 2003-04.

After providing for taxation and accounting for deferred tax benefits as per the Accounting Standard 22, the net profit earned in 2003-04 stood at Rs 92.33 crore against Rs 133.86 crore the previous year.

The airline blamed the outbreak of the Severe Acute Respiratory Syndrome (SARS) and the pilots' strike during the first quarter for the decline in profitability. Another important factor was the rising fuel prices.

But the airline says it has taken several measures to improve its performance including introducing attractive discounted fares for senior citizens wanting to travel to the US, the UK and Europe and offering companion free offer for passengers purchasing tickets at the International Air Transport Association (IATA)-published full fare in first, executive or economy class.

The other measures taken by the airline to generate more revenue and reduce costs include going in for dry leasing of aircraft to increase frequencies to existing stations and to operate services to new stations apart from rationalising operations by reducing operations with the uneconomic Boeing 747-200 aircraft type and replacing them with the more economic A-310-300 aircraft wherever possible.

Besides the airline also generated additional revenue through providing ground handling services. In 2003-04 it secured new ground handling contracts of various airlines at different airports in India including that of SriLankan and Gulf Air at Kochi; Silk Air at Thiruvananthapuram; and Thai Airways in Chennai. The move helped the Ground Handling Department earn Rs 305 crore during the year.

In an effort to become more competitive and respond to the needs of the market, the airline has announced that it would launch a new low-cost airline, Air India Express in 2005.

The airline has started the work for leasing Boeing 737-800 aircraft for AI Express which is to operate flights from various points within the country to the Middle East and some South-East Asian destinations.

Besides, to expand its services in the global market, Air India has invited tenders for acquisition of 50 aircraft — of which one-third are to be on firm order. The airline is to choose between the Airbus A-340-500 and Boeing 777-200 Long Range aircraft for meeting its Medium Capacity Ultra Long Range needs.

Similarly, the airline is to consider either the Airbus A-340-600 or Boeing 777-300 Extended Range to meet its Medium Capacity requirements.

The fleet acquisition plan for the large aircraft was approved by the airline Board at its meeting in Mumbai in November last week. The acquisition plan covers the period 2012 to 2013 and provides for an increase in fleet size from 34 to 74.

Clearly, the glorious days of Air India could soon be back again.