Flag carrier Air India, which kick-started a three-year revival plan in August last year, on Saturday said it had achieved a savings of Rs 563 crore by December 2009 by improving on its fuel efficiency, slashing aircraft material costs and route rationalisation. The airline is expected to save another Rs 400 crore by March 2010 through these measures, Air India chairman and managing director Arvind Jadhav told reporters here.

The carrier, however, has a long way to go before showing a turnaround, after having reported losses of Rs 5,548 crore for FY 2008-09. Giving details on the progress of the revival plan, Jadhav, who had indicated in August that he would also be rationalising the airline?s manpower, said the process was time-consuming and refused to elaborate any further.

The public sector airline has 31,000 employees, whereas its competitors Jet Airways and Kingfisher, who are almost identical in terms of fleet strength and network, have nearly 13,000 employees each. Manpower rationalisation could be a difficult task for Jadhav given that in September he had to backtrack on his decision to slash performance-linked incentives for executive-level employees following widespread protests.

Jadhav said the airline targeted to save around Rs 800-900-crore through the fuel efficiency programme alone. The airline is currently implementing various initiates to enhance its fuel efficiency in association with global airlines body, International Air Transport Association.

?We have saved Rs 146-crore on account of fuel savings programme, so far. By the time we get software (to facilitate better fuel management), we expect around Rs 800-900-crore savings,? Jadhav said.

The fuel efficiency programme envisages vital changes in AI?s operational techniques, equipment settings, use of fuel management, flight planning, engine maintenance and cabin weight management.

?There are several components of the fuel efficiency programme ? those which we can do immediately and those which can be achieved by the procurement of software,? Jadhav said.

The carrier was also looking at achieving savings from other segments such as hotel and transportation, he said. As part of the cost-savings programme, Air India has also started merging its hotel accommodation and transportation, Jadhav said.

He added AI was in talks with banks and financial institutions to convert its Rs 10,000-11,000-crore high-cost debt into a low-cost one. He added the government had approved an equity infusion of Rs 800 crore into the carrier and so financial restructuring was not an issue.

Elaborating on other cost-cutting measures, Jadhav said, ?AI has also combined the booking offices of erstwhile Air India and Indian Airlines to save on establishment costs. Similarly, the office at the Jeevan Bharti building in New Delhi has been surrendered, resulting in a savings of nearly Rs 5 crore annually.?

AI has improved on its passenger load by over 10% and reduced costs in 2009 by deploying new aircraft and route rationalisation.

The CMD said induction of 29 aircraft and enhanced utilisation of its existing fleet helped the carrier phase out 11 old aircraft in 2009. Besides, AI also withdrew from sectors like the India-Gulf routes and transferred these to the Air India Express, its low-cost carrier, to improve profitability.

The flag carrier?s domestic market share in November 2009 increased to 18.8% from 16.6% in August 2009. During November 2009, AI?s market share (18.8%) and the seat factor (74.1%) were higher than that of all legacy carriers on standalone basis. ?Also, AI?s market share has been more than the capacity share in the market. We expect to maintain the uptrend in performance in the coming months too,? said Jadhav.

By March 2010, three more Boeing B-777-200s, two Airbus A-310s and eight Airbus A-320s will be returned or retired from AI?s fleet.

Going forward, the carrier aims to have a separate engineering department eyeing revenues of around Rs 2,500 crore. It also targets Rs 1,5000 crore revenue annually from ground-handling activities. AI currently does ground handling for many international carriers.