Single domestic GDS platform, better aircraft utilisation help Air India cut expenses

Air India chief Ashwani Lohani on January 4 had said that “rumours” of the disinvestment-bound airline’s shutdown are “all baseless”, weeks after he told the Civil Aviation Ministry that the carrier’s financial situation was “grossly untenable” for sustaining operations. 

Moving to a single global distribution service (GDS) platform for domestic ticketing, better utilisation of planes and new international flights in the last one year are some of the sources that are helping the disinvestment-bound Air India to earn more revenue and cut down expenditure during these tough times, according to senior officials.

The officials said that in 2020, single GDS system would help them save Rs 520 crore, operational profit from new flights will earn Rs 120 crore, and swapping small wide-body aircraft for a big one on the Delhi-London route will help them earn Rs 100 crore. While Air India’s net loss in 2018-19 was around Rs 8,556 crore, its current total debt is around Rs 80,000 crore.

Air India chief Ashwani Lohani on January 4 had said that “rumours” of the disinvestment-bound airline’s shutdown are “all baseless”, weeks after he told the Civil Aviation Ministry that the carrier’s financial situation was “grossly untenable” for sustaining operations.

Meenakshi Malik, Director-Commerical, Air India, said on Thursday, “Till October 2018, Air India had contracts with all three GDS platforms – Travelport, Sabre and Amadeus – for domestic routes’ ticket sales. It was costing us too much – around Rs 400 crore”.

A GDS is a computer network system that allows travel agencies and websites to book tickets on any airline for a passenger. “So, in October 2018, we decided to issue a tender to choose one GDS platform only for our domestic ticketing. Travelport won that tender,” Malik explained.

From January 1 this year, Travelport is the only GDS that has an inventory of the national carrier’s domestic routes. “Since Sabre’s contract was to get over on December 31, 2019, it was selling domestic tickets – along with Travelport – from December 3, 2018 till the end of 2019,” she said.

Even during 2019, due to renegotiation of contracts with Sabre and Travelport, Air India was able to reduce its domestic GDS expenditure to Rs 173 crore, indicating savings of around Rs 227 crore when compared to the expense of 2018.

Malik said the national carrier aims to save Rs 520 crore in 2020 through better utilisation of the GDS.
However, Air India’s international inventory continues to remain with all three GDS platforms – Amadeus, Travelport and Sabre. Air India pays around Rs 350 crore per year to these three companies for keeping inventory of its international routes, said Malik.

Vinod Hejmadi, Director-Finance, Air India, told PTI that all nine wide-body planes, which were grounded during the fag end of 2018 due to lack of spare parts, are now operational. These nine planes – five B787s, two B777s and two B747s – have been primarily used in launching new flights in the last one year, he added.

Air India has commenced seven international routes since February last year. These are Delhi-Toronto, Amritsar-Stansted (London), Delhi-Doha, Indore-Dubai, Kolkata-Dubai, Mumbai-Nairobi, and Mumbai-Kuwait.

The airline would also be operating daily flights on Mumbai-Stansted (London) route and thrice-weekly flights on Mumbai-Heathrow (London) route from February 20 and February 14, respectively, Hejmadi said. He added that these new flights have helped the airline earn an average monthly EBITDA (Earnings before interest, tax, depreciation and amortization) of Rs 10 crore approximately.

It means that operational profit from new international flights will be around Rs 120 crore per year.
Also, Hejmadi said just a few days back, the national carrier started using 250-seater B787 aircraft on the Delhi-Washington route and 340-seater B777 aircraft on the Delhi-London route. Previously, B787 was being used on the Delhi-London route and vice versa.

“Our load factors on both the flights are around 90 per cent now. This move to use B777 on Delhi-London route will help us save Rs 50 crore per year and earn Rs 50 crore in addition to that. So, it would be an annual net gain of Rs 100 crore,” he said.

Civil Aviation Minister Hardeep Singh Puri had clarified on December 31 that the national carrier, which is incurring a loss of Rs 20-26 crore daily, will keep on running till it is privatised. The government is expected to issue expression of interest (EOI) as well as share purchase agreement for Air India in the coming few days.

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