National carrier Air India is expected to cut its net loss by about a third to Rs 3,500 crore during Fy16 as a result of a significant reduction in fuel costs and improvement in operating performance, two airline officials told FE on Wednesday, quoting the airline’s recently released budget estimates.
The airline expects an operating profit of about Rs 10 crore during Fy16, its first annual operating profit since the implementation of the government-approved turnaround plan (TAP) in 2012.
It also hopes to achieve a 77.7% passenger load factor (PLF) on domestic routes and a 73 % PLF on international routes during the period.
According to the airline’s executives, the number of passengers travelling by the national carrier is expected to rise to 1.80 crore during Fy16 from 1.69 crore during the previous year on the back of a 7.3% increase in capacity.
“With Air India joining the Star Alliance, the airline expects far more passengers to burn miles in exchange for premium seats especially from the US, Europe, UK and Australia. The projections are based on crude prices remaining in the range of $60-$65 a barrel and exchange rate (dollar to rupee) constant at round Rs 62 per dollar,” said a senior airline official who didn’t wish to be named.
During the first nine months of Fy15 (April 1-December 31), Air India’s total revenues stood at Rs 16,000 crore while its operating expenses were Rs 16,700 crore. The airline posted an operating loss of Rs 1,700 crore and a net loss of Rs 3,600 crore during the same period.
as per FY15 budget estimates, the airline expects a net loss of Rs 4346 crore, total revenues of Rs 21,290 crore and operating expenses of Rs 22,525 crore.
However, it hasn’t always been able to meet budget estimates in the recent past.
The airline, which was expected to post an operational loss of Rs 1,235 crore during Fy15, has accumulated operational losses to the tune of Rs 1,700 crore in the first nine months of Fy15.
The debt-ridden airline, which got a Rs 30,000-crore government bailout approved in 2012, is required to fulfil key operational and financial targets to be eligible for the cash infusion. According to the government-approved TAP, the airline is required to post a total revenue of Rs 26,889 crore in FY16 while its net loss is expected to come down to Rs 1,447 crore during the same period.
However, its latest estimates say it will post a loss of up to Rs 3,500 crore during Fy16. Despite failing to meet some of the TAP estimates, Air India officials are
upbeat on the performance of the airline.
“Air India’s budget estimates for 2015-16 reveal that it will be operationally profitable in 2015-16 itself, much ahead of the TAP projections,” the senior Air India official said.
“The main focus for FY16 would be to improve on our on-time performance (OTP) and return towards profitability. If we can improve on our current performance, we can hope to report profit
Air India’s net debt stood at Rs 36,000 crore as of March 1. The airline currently pays about Rs 4000 crore as loan payment and another Rs 3,800 crore as interest payment, on an annual basis.