Air Indias 777 woes stem from short-haul flights

Written by Debabrata Das | New Delhi | Updated: Jan 30 2013, 09:05am hrs
Air India could make a costly mistake if it goes ahead and sells off five Boeing 777-200LR planes, even as there is no clarity on when it would be able to use the Boeing 787 Dreamliners again.

Already, AI has been forced to revert to its nearly two-decade old jumbo jet fleet of Boeing 747-400s for some of the international routes, as five 777s are out of service.

The 777s were bought for over $200 million per plane in 2007 but six years later, the sale could fetch a maximum of $80-85 million. Sources said that a deal with Ukraine International Airlines has already been reached. But AI director finance S Venkat said, We havent yet finalised the deal with anyone. He did not clarify whether the the company will go ahead with the sale.

AIs average fleet age of active aircraft is at around eight years, as per DGCA data and could go up to around nine if the 777-200s are sold off.

Excess fuel bills because of operating Boeing 747s would increase AIs fuel spend by nearly R20 crore a month compared with the time when we were on a 777-only fleet, a senior AI finance official said. Maintenance costs will also increase, I cannot quantify the increase as the tendering process is still on for repairs to some of the 747s bare fixed structure.

Experts say that it was AIs mismanagement in utilising its 777-200LR fleet led them to becoming unprofitable planes for the carrier.

Boeing 777-200LR planes are only profitable above 2,500 nautical miles, said Peter S Morrell of Cranfield University, UK and author of the book Airline Finance. They are meant for long distance travel carrying a heavy payload (weight of passengers, baggage and belly cargo) and that is why the engines are big and thirsty.

Using them for short distances with fewer passengers will naturally render them unprofitable, he said. It is very important to acquire aircraft fleet that matches the airline's network plans and also to use the aircraft for the purpose they are built to keep routes profitable.

The planes, dubbed Worldliner in aviation parlance, are the aircraft of choice for industry leaders Emirates and Qatar Airways. Both have won several accolades for their premium service, but they don't offer first class in Boeing 777-200LR flights, unlike AI. While AI carries 238 passengers in its 777 fleet, Emirates had 289 while Qatar had 259 seats.

Unfortunately AI followed other counterparts in deploying fleet to South East Asia and the Gulf while ignoring completely unserved destinations like Australia that would have been ideal for 777 operations, said a consultant with a global audit and consultancy firm on condition of anonymity as the firm has previously worked with AI. They have lost out on the opportunity to have a wide network, spent more on fuel and now are faced with an older average fleet age.

As per ministry of civil aviation data, demand from India to Australia stands at 6,659 seats per week and despite Indian carriers having a seat entitlement of 8,531 per week, nothing is utilised by AI and other carriers.

Demand between India and China is also under-served with a demand of 5,097 seats per week coming from India, AI offers only 952 seats per week. Similarly, Kenya and Nigeria have a demand of 1,534 and 1,095 seats per week, respectively, which is not served despite the presence of bilateral seat entitlements.

All of these destinations apart from China are beyond 2,500 nautical miles, which according to experts should be ideal length of 777-200 flights. We constantly review our network, said a senior AI official on the operations side after being asked why so many destinations have not been looked at by AI. At the moment, the demand is coming out of Gulf and South East Asian regions.