The civil aviation ministry is satisfied with the performance of Air India with respect to its 2012 turnaround plan.
The civil aviation ministry is satisfied with the performance of Air India with respect to its 2012 turnaround plan for which the government pumped in R30,000 crore into the loss-making airline, and expects it to post an operating profit this financial year also, secretary RN Choubey told FE.
He said since the carrier’s plan is on track, the ministry expects it to post a net profit in FY19 ahead of the target of 2020-21 stipulated in the turnaround plan. Choubey’s assertion that the state-owned carrier will post an operating profit in FY17 is significant since the airline posted an operating loss during the first two quarters of the current fiscal.
The loss-making airline had posted its first operating profit (since the merger with Indian Airlines) of R105 crore in FY16. However, in the first two quarters of the current fiscal, it reported operating losses of R246 crore and R461 crore, respectively. But Choubey said the losses in the first two quarters were due to two lump-sum payments the airline made during this period, and the remaining two quarters would be profitable.
He said that the airline has improved on certain operational parameters like the On Time Performance (OTP) and Passenger Load Factor (PLF), but debt reduction remains a concern for which it will have to make some concrete plan.
“Last year also Air India registered losses in the first two quarters like this year but I am certain from the review that the ministry has done that it will make an operating profit at the end of the current fiscal year as well. The improved PLF and OTP apart the benign fuel prices will be the main contributing factors,” Choubey said.
Air India’s PLF and OTP have improved significantly in the last two years and the airline has also improved the turnaround time of its aircraft which points towards the increasing operational efficiency.
One of the hefty payments that the airline had to incur during the first half of the current fiscal was towards the increase in lease rentals because of the nine Dreamliner aircraft that the carrier inducted in its fleet earlier this fiscal year.
According to the secretary, Air India’s revenue earning is on track and the management is working on the debt reduction plan.
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In the next five years the carrier will increase its fleet size to 230 aircraft from the current 130 which will include wide body, narrow body and small aircraft but some analysts and industry experts have questioned the decision to induct new aircraft since the aircraft related debt of the airline is around Rs 20,000 crore and the focus should be on reducing it.
“Passenger growth in the aviation sector last year was around 20% and looks to be in same range this year. Growth in the Indian aviation sector will sustain in the next five years so Air India has to increase the capacity and it is sustainable according to the data available. Only crude prices should remain soft and according to our assessment it will remain soft going forward,” Choubey said.