1. Legacy issues continue to drag down Air India’s financial performance: Ashok Gajapathi Raju, Civil Aviation Minister

Legacy issues continue to drag down Air India’s financial performance: Ashok Gajapathi Raju, Civil Aviation Minister

Even as the government has rolled out a national aviation policy and the Regional Connectivity Scheme (RCS) has been kicked off, the civil aviation ministry still needs to sort out several issues.

By: | Published: May 23, 2017 7:39 AM
Ashok Gajapathi Raju, Civil Aviation Minister

Even as the government has rolled out a national aviation policy and the Regional Connectivity Scheme (RCS) has been kicked off, the civil aviation ministry still needs to sort out several issues. Civil aviation minister Ashok Gajapathi Raju tells FE’s Malyaban Ghosh while Air India’s operational performance has improved, its legacy issues continue to drag down the airline’s financial performance. The turnaround plan has not helped solve any of the financial problems of the airline, the minister says. Excerpts:

Has Air India’s performance improved in the past three years?

If you look at different parameters, like the passenger load factor (PLF), on time performance (OTP) and utilisation of aircraft you will find that it has definitely improved from what it was during the period before that.On the financial side the problem still persists because there are legacy issues and the interest cost of R4,500 crore is hurting. Personally, I would like to see Air India to survive. However, if you leave it like that then chances of survival will become bleaker with every passing day because the financials are getting eroded. The turn around plan (TAP) or the financial reconstruction plan were good intentions and money has been infused from the government’s kitty, but it has not solved any problems.

Beyond the period stipulated under the TAP, Air India would still be at square one. There is a lot thinking and suggestions going on to reduce Air India’s debt.

Do you think issues related to lack of discipline among AI’s crew and pilots have reduced?

I think discipline among Air India’s crew and other employees have improved otherwise their OTP numbers would not have improved. They have simulators in Mumbai and Hyderabad whose utilisation were quite low but now that has picked up and are close to the internationally accepted norms. Their efficiency would not have gone up if had there been a discipline issue among the employees. Their performance shows they are capable of performing but the financials are so bad that it is pulling them down.

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What is your take on foreign airlines looking for opportunity to set up a wholly owned airline in India?

About 30% of the population has income equivalent to the middle class British or American families and this sizable chuck of population flies at least once a year on an average. So whoever is in the business is looking at this potential in the Indian market. As of now 49% foreign direct investment (FDI) is allowed through the automatic route and recently our commerce department made an announcement regarding a 100% FDI but the details are still to be worked out and no body has approached us so things have not moved that fast. Our own airlines are also little bit apprehensive on this and we need to take every one into confidence on this issue and will have to think about the competition as well. Right now it is in the realm of speculation.

Will the expansion and development of the leading airports under AAI take a backseat since a substantial part of the capex will be spent on developing airports in the smaller cities and towns?

AAI wants to spend Rs 7,000 crore on the development of airports in the next three to four years. Further, there has been an announcement of a budgetary support of Rs 4,500 crore for development of airports for the next few years. It was announced in the budget itself that, with a ball park figure of Rs 50 – Rs 100 crore, development of fifty airports will be taken up across the country. There are more than 400 airfields across the country and we are willing to develop them but it has to be demand driven. We don’t want to generate a non-performing asset like some of the airports have been in the past.

Is there any progress on the land monetisation by AAI?

In an airport there are certain portions of the land that have to be kept vacant. However, in certain parts where construction is allowed if a hotel or a mall is being built then it complements the airport.
The aviation sector has also evolved like the hospitality sector. First, the portion of land to be utilised will have to be identified and the officials are working on the amendment of the AAI Act which should take place without any hindrance since it had already been mentioned in the budget.

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