Air India: is good money chasing bad?

  • Tushar Srivastava, Hindustan Times, New Delhi
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  • Updated: Sep 16, 2013 02:59 IST

He may be showing mild signs of improvement but the Maharaja, the mascot of India’s national carrier, still has miles to go.

Air India (AI), which has been surviving on a bailout funded by the taxpayer, had a miserable performance in 2012-13. Only 14 out of the total 201 services that AI operated managed to meet the total cost of operations.

The silver lining: this was an improvement over the previous year when only one service operated by the airline met the total cost of operations.

Seventy eight services did not meet the cash cost of operations in 2012-13. Cash costs include fuel costs, maintenance costs for aircraft and engine, crew costs, navigation charges and landing fees. Also, as many as 109 services met the cash cost but did not meet the total cost of operations.

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“AI remains structurally challenged and critically vulnerable to the external and internal environments. A genuine and sustainable turnaround is not feasible and realistic under government ownership and management,” said Kapil Kaul, South Asia CEO of aviation consultancy firm Centre for Asia Pacific Aviation (Capa).

Executives in the airline remain optimistic.

“AI, like other carriers, has been affected by the rupee fal land rising oil prices but we are confident of turning profitable by 2018,” said an AI executive.

In fact, for the first time since its merger with Indian Airlines in 2007, AI was EBIDTA (earnings before interest, taxes, depreciation and amortisation) positive in 2012-13 despite a two-month long pilot-strike and the grounding of its Dreamliner fleet.

“AI’s financial performance has seen an improvement in the last four quarters. Restricting its network has shown results with routes meeting total costs and cash costs showing a better trend,” said Kaul.

“AI needs to understand ground realities of its performance. Sheer minor increase in market-share, load factors and on-time performance should not be deemed as improvement,” said Jitender Bhargava, former executive director, AI.

“There is a need to look at systematic aspects so that improvement can be brought about because unless and until AI management and the government recognise the gravity of the problem all attempts at a turnaround will be half-hearted.”

 

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