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Air India says financially hit but operationally sound

Ahead of a crucial meeting of a ministerial panel on the future of Air India, the beleaguered flag carrier has sought to suggest that its legacy issues on finances apart, there has been considerable operational improvement.

india Updated: Aug 11, 2011 15:54 IST

Ahead of a crucial meeting of a ministerial panel on the future of Air India, the beleaguered flag carrier has sought to suggest that its legacy issues on finances apart, there has been considerable operational improvement.

In a presentation sent to the group of ministers (GoM) headed by finance minister Pranab Mukherjee, the airline said in areas such as passenger load-factor, revenue-passengers and capacity utilisation, distinct improvements were seen in the past three years.

"The passenger load factor, which indicates the efficiency of utilizing seat capacity, has improved from 59.5 % in 2008-09 to 66.7 % in the year 2010-11," the company said in the presentation.

According to the company, various steps were initiated and adopted since April 2009 to merge the various systems used by Air India and Indian Airlines, such as shifting to a single 'AI' flight-code and using a single software for ticketing.

"Flight planning system has also been initiated which will result in saving fuel," said the airline in its presentation, while also highlighting that that it has removed as many as 46 old aircraft from its fleet, inducting new ones.

"It is note-worthy the available seat-kilometres have been maintained, despite retiring these aircraft."

According to the airline, the primary reason for continued losses was on account of high interest cost on loans taken for buying new aircraft as well as for working capital, which shot up from Rs1,722 crore in 2008-09 to Rs3,285 crore in 2010-11.

"Similarly, there has been an increase in depreciation from Rs1,3450 crore in 2008-09 to Rs1,758 crore in 2010-11."

Civil aviation minister Vayalar Ravi had earlier blamed rising fuel prices, falling yields, coupled with high interest rate employee-aircraft ratio as the main reasons for Air India posting an estimated loss of Rs6,994 crore loss in 2010-11.

Prime Minister Manmohan Singh had also assured his intervention and a cabinet meeting presided over by him Aug 4 cleared a Rs1,732-crore package for the flag carrier, in the form of Rs.1,200 crore in equity and the remaining for evacuation and other social services of the carrier.

The ministerial panel headed by Mukherjee is mainly looking into Air India's turnaround and financial restructuring plans that have been prepared by the State Bank of India's financial advisory arm, SBI Caps.

The panel's next meeting is scheduled for Aug 17.