The turnaround plan for Air India (AI) has included a plan to monetise its buildings, including the corporate office at Nariman Point in Mumbai and in other cities, as well as selling its slots at various domestic and international airports where it does not have good load factors. AI?s 24-storeyed building in Mumbai?s premier business district could add substantially to the airline?s cash flow, as rent for a 1,000 sqft space in that area would be about Rs 4.8 million per year.
The monetisation plan is part of the series of measures it aims to take to improve the operating ratio of the airline, which is 116.96% as on March 31, 2007 (ie, AI is spending approximately Rs 117 to earn Rs 100).
The other components of the plan include reduced turnaround time for each aircraft that can cut its expenditure to the extent of Rs 2,300 crore on an annual revenue of Rs 17,000 crore ? that is expected to end 2008-09 with a cumulative loss of Rs 7,200 crore ?as per the civil aviation ministry. Currently, the rate of utilisation of AI is nearly 30% less than its international counterparts? norm of daily 11 hours of flying. Arvind Jadhav, chairman and managing director of AI has already started fixing responsibilities on his technical team to ensure each aircraft flies about five times a day from the current three trips they make.
Speaking to FE, Jadhav recently said, ?Improvements in the existing capacity utilisation can potentially wipe off my operating losses?. He has a point. If other expenses, which is basically for aircraft maintance and material charges, of Rs 697 crore and Rs 338 annually as on March 31, 2007 are reduced, the difference between the total operating expenses of the airline at Rs 9,870 crore and total revenue at Rs 9,219 crore can be cut down sharply.
The stick Jadhav has employed has a rationale in the fact that in a ten year time frame the available seat kilometres for the airline has stayed stagnant and has actually dropped marginally for the latest reported year to 31,026, from 31,704, despite adding more aircrafts to its fleet. The turn around plan therefore hinges on the fact that providing more seats would automatically improve the cash flow for the airline.
These suggestions formed part of the plan Jadhav submitted to a committee of secretaries chaired by Cabinet secretary on Saturday.
The government has also simultaneously planned to raise the equity base of the airline from Rs 153.84 crore to about Rs 2,500 crore to improve its leveraging power. AI also plans a route revamp for both domestic and international network.
Other steps to curtail cost at the carrier include suggestions that foreign carriers need not be given additional bilateral rights at destinations where AI has a strong network.