Flight of fancy Air India sees losses narrowing this fiscal

Written by Rhik Kundu | Mumbai | Updated: Jun 3 2014, 14:13pm hrs
Air IndiaAir India, which has been struggling financially, expects to considerably narrow its operating losses in fiscal 2015.
Indias national carrier Air India, which has been struggling financially, expects to considerably narrow its operating losses in fiscal 2015, believing it will carry more passengers and reduce costs as a result of restructuring its operations, a senior company executive said.

Air India hopes to do better in the current financial year despite the imminent arrival of new entrants like AirAsia India and a yet-unnamed airline that is a joint venture between Tata Sons and Singapore Airlines. It remains to be seen how Air India will manage to garner a greater share of passenger traffic in the face of increased competition and an aggressive fare war playing out in the Indian aviation sector.

Competitors like SpiceJet, Indigo and GoAir have slashed fares by as much as 35%, in some cases since the beginning of the current calendar year, to woo passengers.

The Air India executive, who spoke on condition of anonymity, said the carrier was expected to post an operating loss of R1,235 crore in 2014-15, versus R2,012 crore in 2013-14. The net loss of the airline is also estimated to come down to R4,346 crore by the end of fiscal 2015, from R5,388 crore last fiscal.

A slew of reforms and performance improvement measures being undertaken by the company is expected to help the airline save Rs 1,000 crore this fiscal, the executive said. This includes attempts to improve passenger revenue and higher operational efficiencies.

One of the restructuring measures undertaken by Air India this fiscal, and which is helping save costs, was hiving off units such as ground handling and maintenance, repair and overhaul into separate entities.

Air India, which is required to keep a seat utilisation level of above 75% as per the government implemented-turnaround plan, has achieved an average seat utilisation of 78-80% on both economy and business classes across its fleet of domestic and international flights during May, the executive said. Our recent achievements make us confident of achieving our projections, he added.

Indian airlines have been grappling with substantial losses due to exorbitant fuel costs and taxes, along with increased competition.

A report issued by Center for Asia Pacific Aviation (CAPA) in February had predicted that three Indian airlines Air India, Jet Airways and SpiceJet were expected to post a combined loss in excess of $1.2 billion in fiscal 2014.

Jet Airways reported its highest annual loss of Rs 4,129 crore for fiscal 2014, which includes losses made by its subsidiary JetLite. SpiceJet also posted its highest ever loss of Rs 1,003 crore for the year ended March 31, five times higher than the loss it made in 2013. Both carriers are chalking out strategies including restructuring and cost rationalisation to return to profitability.