Not a blip any more

Becoming popular: Buoyed by increased capacity and reduction in costs, Air India Express earned net profit of ₹296.7 crore in 2016-17

After its second consecutive year of profits, Air India Express is aiming higher. V Sajeev Kumar writes

After turning a new chapter in its history last year, when Air India Express made net profits for the first time, the low-cost arm of Air India has done a repeat. Buoyed by increased capacity and reduction in costs, Air India Express earned a net profit of ₹296.7 crore in 2016-17. Though the airline had reported a better bottomline a year ago (₹361.68 crore), its CEO K Shyam Sundar is pleased.

“The net profit earned in 2016-17 is particularly significant as the competition from Indian private carriers increased considerably during the year, added to that was the sluggishness of Gulf economies,” said Sundar. The airline’s revenues increased by 14 per cent to ₹3,335 crore.

Sundar attributed the growth in revenue to prudent commercial and management interventions including the better utilisation of the assets. This has given rise to a reduction of about 5-7 per cent in unit costs. The average daily aircraft utilisation rose to 12.2 hours from 11.3 in the past year.

Nimble-footed

Having ensured that its maiden profit was not an exception, Sundar is now introducing a host of measures to further spread the airline’s wings. Starting off, Air India Express has become more nimble in responding to market conditions.

In the wake of the Qatar crisis, when several of its peers cut off diplomatic ties with the country, Air India Express has firmed up plans to introduce three flights from Kochi to Doha from August. The fourth one will be added in September. “We happened to be one of the first Indian carriers to respond to the Qatar situation by commencing short-term additional operations from Thiruvananthapuram, and it will continue up to mid-September,” Sundar said adding that connections were earlier available only via Kozhikode. The additional flights will benefit the airline as its competitors from countries (like Emirates and Etihad Airways from the UAE) that had severed ties from Qatar, had stopped services. India’s first international budget airline also has its sights on other lucrative routes. It plans to start flights connecting Madurai-Singapore and Surat-Dubai. Besides, it has reserved a specific capacity for the upcoming Kannur airport in Kerala, for flights to Sharjah. “This will enable us to become the first airline company to start overseas operations from Kannur. This will benefit the large expatriate population in the region”, Sundar said.

The market, says the CEO, has responded positively to the airline’s recent steps to expand services. The company had introduced flights from Delhi and Mumbai to destinations in West Asia. Air India Express also launched services from Kolkata and Chandigarh, connecting to Sharjah. In one year, the airline introduced operations on 11 new routes and increased the frequency/capacity on 13 sectors. Consequently, it flew 3.42 million passengers in 2016-17, up 22 per cent from 2.8 million a year ago. While the low crude oil prices benefited the airline, the CEO said “this has cut both ways – by bringing down the operational cost of the airline while at the same time, reducing the demand from the Gulf region due to reduction in job opportunities”.

International focus

The expansion might just be the start of a more ambitious plan. Sundar has appointed consulting firms KPMG and ICF to draw a vision document focusing the business plan and the fleet strategy for the next 10 years. The opportunities for expanding to new markets will be explored”. While the core market will continue to be the international destinations, the airline may explore the feasibility of enhancing domestic presence in sync with commercial interest of the parent organisation. Air India Express at present offers domestic connections between Chennai-Thiruvananthapuram, Kozhikode-Thiruvananthapuram, Kochi-Thiruvananthapuram and Kochi-Kozhikode.

Air India Express has been in talks Dubai-based low cost airline FlyDubai for interline arrangement. If it materialises, the agreement will help the Indian airline to sell tickets to passengers for travel beyond Dubai. Air India Express would feed passengers from India up to Dubai, and FlyDubai would connect them to destinations beyond.

There are factors that could benefit a possible agreement between the two airlines. Around 90 per cent of the Indian airline’s capacity is deployed in Dubai; both the airlines share common features, including same type of aircraft and same ticketing platform, which is Radixx. FlyDubai operates from the same terminal in UAE.

These initiatives will help boost Air India Express revenues by 10 per cent in 2017-18, Sundar said. It will also help that the company is in the process of signing deals for two more aircraft on dry lease, which will be delivered in 2018-19. With this, the number of aircraft will increase to 25 from the present 23 B737-800 NG aircraft, having a capacity of 189 seats in an all economy configuration.

“In fact we increased our capacity about 33 per cent in last financial year by inducting six aircraft in our fleet”, he said.

Published on July 25, 2017
This article is closed for comments.
Please Email the Editor