High ATF may make Rs 2,000-cr hole into Air India’s bottomline

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New Delhi, Aug 21: State-run carrier Air India expects to report a loss of Rs 2,000 crore for the financial year to end-March, Raghu Menon, chairman and managing director of National Aviation Company of India (NACIL), Air India’s holding company said on Thursday.

The losses will be mainly due to rising fares and competition which is severely hurting the carrier.

However, Air India, the entity formed by a merger of Air India and Indian Airlines in August 2007, would add 14 aircraft to its fleet of 154 this fiscal, the CMD said.

Air India and Indian Airlines posted a combined net loss of Rs 688 crore for the financial year ended March 2007.

Because of air turbine fuel prices, fares are going up. Definitely there is a downturn, Menon said. Domestic jet fuel prices, which constitute up to 45% of an airline’s operating costs, have risen by 56% since the start of the year on the back of high crude oil. The surge in prices has led airlines to hike fares and trim routes, denting demand from leisure travellers. But Menon said he expects fuel prices to fall in September. Public sector oil companies have indicated there will be a downward revision in September, he said, citing lower oil prices, which are down more than 20% from peaks hit in mid-July.

Menon said Air India was taking steps to increase revenues and cut costs, but did not give details.

Air India reportedly expects to save at least Rs 1,000 crore in the year to end-March 2009 by cutting routes, outsourcing jobs and eliminating perks to senior executives.

To solve this problem, Air India is likely to ask the government for infusion of Rs 2,000 crore as it seeks to expand its equity base, which currently stands at Rs 145 crore, Menon said. But he added it had yet not finalised any plans.

Additional funds may help the company to pay for 111 planes on order and regain market share from Jet Airways (India) Ltd and other overseas airlines that have expanded into the country. India’s government last year formed the National Aviation Co. by merging international carrier Air India Ltd. with its domestic counterpart Indian Airlines Ltd.