The fortunes of Air India could be changing.
A combination of the airline’s Board’s decision to lease 19 Airbus A-320 aircraft and the reintroduction of the newest civilian aircraft – the Boeing 787 – could prove to be a game changer for the State-owned airline.
The A-320 aircraft being replaced are over two-decades-old that have outlived their economic life.
The aircraft were part of the deal that the then Indian Airlines had signed with the European aircraft manufacturer, Airbus, in 1989.
Airbus
Introducing newer aircraft and phasing out the old ones will mean savings in fuel costs for Air India.
With fuel costs shooting up because of various factors, any reduction in costs here is bound to help the national carrier. Another plus for Air India will be that the leased capacity in the A-320s will also help it compete in the domestic market as these aircraft will have an all economy seating.
At the moment, low cost airlines have captured over half of the domestic market thanks to all-economy class that they operate.
The introduction of an all- economy capacity could possibly help Air India get some passengers back on its aircraft in the domestic skies.
Then there is also the addition of the newest civilian aircraft, the Dreamliner Boeing 787, to its fleet.
product mix
According to analysts, a combination of Boeing 787 aircraft along with the leased A-320 in its fleet is the right product mix for the airline.
This is because both the aircraft provide the right mix of passengers to be carried, fuel efficiency and cargo to make it profitable for Air India to attempt start having financial viable operations.
Air India is expected to have 14 Dreamliners in its fleet by December this year.
The airline’s officials point out that a number of factors including fuel burn, 264 economy and business class seating on the Boeing 787 and the range of the new aircraft will help it.
Boeing's compensation
Further, the airline will also use the aircraft to start services to Manchester, Sydney and Melbourne thereby making it more competitive in the international skies.
Air India will also receive some amount of compensation from Boeing both for the over two year delay in the original delivery of the 787 aircraft and also for the almost five months for which the aircraft were grounded soon after they were inducted into service because of some technical problems.
Cost cutting drive
The airline is also taking steps to reduce other costs.
During financial year 2012-13, staff costs due to rationalisation of pay helped Air India save Rs 243 crore.
Staff costs earlier were among the three largest costs incurred by the airline. Air India also expects to raise close to Rs 1,000 crore from the monetisation of its unutilised assets in Delhi, Chennai, Coimbatore, Kolkata and Mumbai.
In the last couple of months the passenger load factor or the number of passengers flown by the airline has been the highest in the industry in the domestic skies.
The data released by the Directorate General of Civil Aviation (DGCA) shows that the airline has been recording a consistent growth in the number of passengers carried among all full service airlines.
Of course cumulative losses since April, 1, 2007 till March 31, 2012 of Rs 28,000 crore and the Government pumping in Rs 30,000 crore the road to recovery is going to be long.
But at least these steps provide a roadmap for moving in the right direction.