The Hindu Business Line : Some positive numbers for Air India

While Air India's net profit at Rs 16.29 crore for the year 2005-06 was a decline of more than 82 per cent over the previous year's net, there were some silver linings for the Maharaja. For instance, the flights operated by the national carrier to the Asian and African regions were still its largest revenue generator. The airline's annual report 2005-06, tabled in Parliament recently, shows that revenues from the Asia and Africa region (including Australasia) stood at Rs 6,180.27 crore, up from Rs 5,477.9 crore recorded during the previous year.

In comparison, the US and Canada region accounted for Rs 1,539.3 crore, up from Rs 1,198.5 crore the previous year, while the UK and Europe accounted for Rs 1,114.1 crore, (Rs 911.66 crore previous year). At the same time, the total revenue of the company consisting of passengers, excess baggage, mail, cargo, charters, pool, and royalty from Air India Charters Limited, among others, grew by 19.6 per cent at Rs 9,244.95 crore, as compared to Rs 7,726.89 crore in 2004-05.

All this, however, did not mean that the airline could come close to the Rs 96.36 crore net profit it had notched up in 2004-05. According to the annual report for 2005-06 one significant reason for this decline in profits was increasing fuel costs, which went up to Rs 3,134 crore for 2005-06, compared to Rs 2,182 crore the previous year.

In order to lessen the impact of increasing fuel prices, Air India took a number of steps to cut costs during the year, including starting to hedge on the uplift of aviation turbine fuel. In February last year, the airline set up a fuel hedging cell to facilitate hedging in fuel, a move that helped it save close to $400,000. Fuel costs account for almost 30 per cent of the airline's total operating costs.

The annual report also points out that though the net worth of the company increased from Rs 536 crore during 2004-05 to Rs 547 crore during 2005-06, due to increased borrowings in the form of working capital loans for pre-delivery payment to Boeing for acquisition of aircraft, the debt increased from Rs 1,262 crore to Rs 2,156 crore.

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