Flag carrier Air India (AI) is in the process of closing down 22 offline stations across the globe, which would lead to cost savings of nearly 4% ?around Rs 680 crore ? of its revenues of Rs 17,000 crore.
Offline stations are ticketing and administrative offices set up in cities where the airline has stopped flying or has minimal network. Each of these stations have a minimum of eight officials and use expensive office space. The carrier had set up offices at Seoul, Jakarta and Auckland in Australia, among others, to operate on these sectors profitably, but failed to generate business on these routes.
AI’s CMD Arvind Jadhav has also asked its executive directors posted in foreign cities, where there is marginal business, to return to India. He has asked top AI officials to prepare a detailed report on savings generated by shutting these non-profit stations.
The closing down of these offline stations will, however, have minimal impact on the airline’s operations globally, as it is set to become a member of the Star Alliance by 2010. After joining Star Alliance, AI would benefit by partnerships with other member carriers for marketing, sourcing of spares and long-term contracts for fuel. As the full integration happens with Star Alliance, the flying returns scheme of AI would also be integrated with the frequent flier programmes of member carriers, where miles earned on one carrier can be redeemed with any of the other member airlines.
Joining the alliance would also mean sharing of airport lounges and synchronisation of flight schedules for the national carrier. Passengers would be able to undertake seamless travel on a single air ticket, even if it requires flying several carriers on a single journey.
The carrier is reeling under losses of Rs 7,200 crore for FY09 and is taking steps to stay afloat at a time when its debt is Rs 16,000 crore. It is looking to infuse equity of over Rs 2,500 crore and is also seeking a loan of Rs 10,000 crore. Arvind Jadhav had recently told the media, “We will turn around the carrier within three years. Efforts are on to bail it out of dire circumstances.”
Simultaneously, the carrier has taken other cost-cutting measures like hiving off its cargo section into a separate subsidiary, which would again churn revenues of Rs 1,200 crore from the existing Rs 800 crore. AI’s team of officials is already studying newer markets in South-East Asia, far and Middle East and Europe to increase their capacity from 1,500 tonnes to over 5,000 tonnes within 36 months.