Air India has significantly improved its operating performance on the loss-making routes that were bleeding the airline financially.
As on October 31, around 69% of Air India’s total routes now cover their variable cost, across both domestic and international routes. Variable costs for the airline include fuel costs, landing fees, catering charges, crew expenses, salaries and maintenance cost. Air India operated 400 flights daily to 50 Indian and 33 international destinations.
As on December 31, only 40% of Air India’s routes were covering their variable costs. The airline is targeting to increase this proportion to 81% by the end of fiscal 2015, according to an Air India official.
For the six months ended September 30, Air India posted a 10.7% year-on-year increase in passenger revenues to R7,415 crore, the company official said.
The Air India executive said the carrier had seen passenger traffic strengthen significantly across loss-making routes, including those connecting India with Australia, Thailand and Italy.
Air India, which was losing about R70 lakh per day in May 2014 on the Delhi-Sydney-Melbourne route with a low passenger load factor (PLF) of around 50%, registered a PLF of 72% and generated a surplus of R3 crore on this route in October.
On the Delhi-Rome-Milan-route, where Air India registered a PLF of only 50% till September, the airline could cover its costs in October by registering a PLF of 67% in October. “We hope to achieve a load factor of 75% on this route by early 2015 on the back of an enhanced marketing campaign, including across social networking sites,” the Air India executive said.
Air India’s flights to Thailand, which is among the better performing international sectors for the airline, also witnessed an increase in PLF due to the introduction of Boeing 787 Dreamliner aircraft on this route.
The carrier’s flights to Bangkok registered a PLF of 72% in October, up from 60-65% in the few preceding months.
With Air India’s fleet of Dreamliners delivering positive results for the company, the airline has also replaced its fleet of Airbus aircraft on the Delhi-Singapore route with the bigger Dreamliners to compete with Singapore Airlines, which introduced the superjumbo Airbus 380 in April.
“We have been able to maintain a 70% load factor after introducing Dreamliners on the Delhi-Singapore route despite having competition from Singapore Airlines and other airlines,” the Air India executive said.
AI’s fleet of Dreamliners is helping the carrier utilise its aircraft better.
“The Dreamliners have been giving us an 89% on-schedule performance,” the official said. “The average utilisation of the Dreamliner aircraft currently stands at 13.9 hours per day in October, up from 12.8 hours per day in August. With the arrival of the 17th Dreamliner aircraft on December 7, we hope to further boost our operations.”
On the domestic front, Air India is managing to recover variable costs across 89% of its routes, as of October, after introducing the more fuel-efficient Dreamliners and Boeing 777-300 ER aircraft to connect major metros in the country.
On international routes where the carrier is still unable to recover costs at least, Air India plans to cut down the frequency of flights after a review by the company’s board of directors scheduled for March 2015. Some of these routes include Ahmedabad-Mumbai-New York, Mumbai-Delhi-New York, Ahmedabad-Mumbai-London, Hyderabad-Delhi-Chicago and Mumbai-Delhi-Shanghai.
Air India has seen increased passenger load factor (PLF) on international routes
Airline covering fixed costs on 69% of its routes now, compared with 40% as on Dec 31
Delhi-Sydney-Melbourne route, which was losing money, earned R3 crore surplus in October
PLF on Delhi-Sydney-Melbourne route improved to 72% vs 50% earlier
PLF on Delhi-Rome-Milan route at 67% vs 50% earlier
Passenger revenues at R7,415 crore for the six months ended Oct 31, up 10.7% y-o-y