Of the 120 international flights, only three routes make money
In what comes as a major setback to Air India’s (AI) government-mandated turnaround plan, minister of state for civil aviation Mahesh Sharma told Parliament on Tuesday that only 9 out of 370 daily flights of the flag carrier are currently profitable. Of the 120 international flights, only 3 make money, while on the domestic, front 6 break even.
This assertion, which is in the form of a written reply to the Lok Sabha, is a stark contrast to recent claims by the AI management that performance is improving across several operational parameters such as passenger load factors (capacity utilisation) and yields. AI officials have said that two-thirds of its flights today meet variable costs like for fuel and other airport charges. These costs, however, do not include heavy burdens like interest costs, staff salaries and depreciation.
The routes AI makes money on are Delhi-Leh, Delhi-Kolkata, Leh-Jammu, Delhi-Srinagar, Srinagar-Leh and Delhi-Hyderabad-Vijayawada. While most of these routes see limited competition, this also means that the carrier is making losses on the busiest route — Delhi-Mumbai. Delhi and Mumbai airports account for about 60% of all national air traffic and is dominated by market leader IndiGo with daily flights and others like SpiceJet and Jet Airways.
The three international routes registering profits are Cochin-Kozhikode-Jeddah, Kozhikode-Sharjah and Kolkata-Yangon. Clearly, flights to Europe, South Asia or North America are not making money, indicating that flyers have switched to Gulf carriers like Emirates, Etihad and Qatar, besides European rivals for these sectors. Meanwhile, competition is also increasing in the domestic front with players like IndiGo utilising bilateral air services agreements to increase services to the West Asia and South Asia, and new airlines like Vistara looking to start long-haul routes.
“Grant of traffic rights to scheduled Indian carriers depends on requests received from designated Indian carriers based on their commercial judgment and availability of bilateral rights to operate on international routes. However, priority is given to the operational plan of Air India while granting traffic rights,” the minister said.
Incidentally, AI has withdrawn/restructured five domestic and four international routes since 2012, which together led to a loss of R455 crore over a two-year period, with many of the routes being taken over by rivals Jet Airways, Saudi Airlines, IndiGo, GoAir and SpiceJet. FE had reported this in its edition dated July 16.
With a view to improve profitability, AI is opening new routes with its new fleet of the more fuel-efficient Boeing 787 Dreamliners and replacing older planes on some key existing routes. Last year, the carrier also joined the world’s biggest airline group Star Alliance, a move that will help it offer more international connections and improve its service offering.
In August, aviation minister P Ashok Gajapathi Raju issued a set of 16 guidelines for the AI management to improve efficiency, highlighting that a turnaround should be made in three years. FE had reported this in its edition dated August 17. While legacy issues pertaining to mismanagement and high debts — about R45,000 crore remain, Raju said the airline should transfer about 2,000 of its excess staff to other government bodies like the Airports Authority of India, retire older cabin crew and focus more on innovative marketing schemes like selling empty business/first class seats at half price in the last minute.