The Hindu Business Line : Air India hopes to cut costs by Rs 900 cr in a year

“The airline’s expenses are around Rs 18,000 crore and the revenues are Rs 14,000 crore. The gap is Rs 4,000 crore. Some of the measures, the airline is planning to take could narrow this gap.” — Mr Arvind Jadhav, CMD

Shubhra Tandon
N.K. Kurup

Mumbai, June 4 Air India proposes to introduce a set of measures that could bring down its operating costs by around Rs 900 crore in the next one year, said the airline’s new chief, Mr Arvind Jadhav.

The move assumes significance as it comes at a time when the Finance Ministry has asked Air India to prepare a detailed plan on how it would spend the Rs 4,000-crore equity (and soft loans) that it expects from the Government. The company needs these funds to meet its working capital requirement.

“The financials are being worked out. We are very clear that we require a lifeline. Right now, I need to pay some Rs 2,000-odd crore to my suppliers and vendors,” Mr Jadhav, CMD, National Aviation Company of India Ltd (Nacil) which runs Air India, said in an interview to Business Line.

The measures being taken to cut costs include a system to ensure optimum fuel consumption through usage of technology which could lead to a saving of Rs 300-400 crore annually, Mr Jadhav said.

A tighter flight plan, a better weather condition reporting system and ensuring greater degree of comfort between pilot and the flight dispatcher will all contribute towards these savings.

Rationalisation of routes, proper scheduling of repair and engineering services and cutting down on employee travel expenses could save another Rs 400-500 crore, he said.

“Roughly, the airline’s expenses are around Rs 18,000 crore and the revenues are Rs 14,000 crore. The gap is Rs 4,000 crore. In the current situation, this gap will only increase. But some of the measures, the airline is planning to take could narrow this gap,” he said.

Going public?

Mr Jadhav is optimistic about Nacil going for an IPO. But the question seems to be the timing.

“It requires at least six to seven months to work on an IPO,” he said.

The Civil Aviation Minister, Mr Praful Patel, had indicated the government’s intention to list Air India, but he said the airline had to take some corrective measures before going public.

According to Mr Jadhav, another important step would be to ensure on-time performance of flights.

“The most important parameter to see the health of the airline is its on-time performance. This month onwards, I would start looking at 100 flights to check on their on-time performance,” he added. This, he said, is crucial to ensure the airline’s brand image.

Main issue

He said one of the main issues facing Air India today is the “way the people within the airline communicate with each other”.

Effective communication is important for ensuring team work and solving daily problems, which is lacking, he said

Similarly, hospitality plays a major role in the airline business. Here too, the attitude of the people (airline employees) is crucial, Mr Jadhav said.

He wants to bring in a new service culture which would ensure a comfortable flight to every class of passenger flying Air India.

“For this, there needs to be a change in attitude of people from top to bottom,” he said. If I can achieve this, 95 per cent of the battle is won,” he added.

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