Logistics

Air India to achieve fiscal targets two years in advance?

Ashwini Phadnis New Delhi | Updated on January 20, 2018

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Air India hopes to report an operating profit in FY 2015-16, two years earlier than what had been envisaged in the original Turnaround Plan (TAP) approved by the Centre in April 2012. The airline has also advanced its projections for reporting a cash profit to 2017-18 from 2019-20, and hopes to report a profit after tax (PAT) in 2018-19, two years earlier than what was envisaged earlier in TAP (2021-22).

While the operating profit is likely to be in the region of ₹8 crore, sources indicated it would not be possible to share the other profit figures as these may change.

The revised TAP and actual performance vis-a-vis TAP for the state-owned carrier were reviewed by its Board at its meeting here last week. During 2015-16, the airline’s yields were higher at ₹5.02 in the domestic sector and ₹3.66 in the international sectors than what had been laid down in the TAP. The Board asked the airline to work on increasing yields by 2-3 per cent annually, starting from fiscal year 2017 onwards.

The revised TAP envisages an addition of 43 new aircraft between 2016-17 and 2019-20, apart from 12 wide body aircraft that would comprise six 787, three 777-300 Extended Range, and another three aircraft on dry lease.

While the induction of the wide body aircraft will be substantially from the order placed by the airline with Boeing in 2005, the narrow body aircraft will be leased from the market.

The airline is also planning to add 18 Boeing 737-800 and 35 ATRs in its subsidiary companies on dry lease. The acquisition plan envisages a net addition (after phase out) of 100 aircraft for AI and its subsidiary companies, to increase its market and capacity share both in the domestic and international markets.

“The fact that global crude prices are down, the airline’s operating efficiencies have improved, and passenger loads are better than what was envisaged in TAP – have all helped advance the target date for achieving the financial goals, than what was earlier envisaged,” said a senior airline official, who wished not to be named.

Besides, the decision to hive off the Air Transport Services Limited (AITSL) and Air India Charters Limited (AICL) has also paid dividends for Air India.

AITSL, which provides ground handling services at airports around the country, reported a PAT of ₹100 crore in 2014-15 and contributed ₹62 crore to AI’s revenues.

AICL is an Air India subsidiary that operates Air India Express. AI Express has a revenue share agreement with AI, which earned the parent ₹325 crore in revenue, in 2014-15.

The Board also noted that while Air India’s ‘On Time Performance’ on a network wide basis at 78.4 per cent was lower than the TAP target of 90 per cent, it was in line with what Star Alliance members were able to achieve.

The airline was able to report a better passenger load factor of 75 per cent on its network during 2015-16, higher than the TAP target of 73 per cent.

The domestic load factor was even higher at 79.8 per cent. The revised TAP has reset the target at 85 per cent on domestic routes and 80 per cent on international routes going forward.

Published on May 26, 2016

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