Air India on drive to reduce costs

Air India on drive to reduce costs
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First Published: Wed, Mar 28 2007. 12 57 AM IST
Updated: Wed, Mar 28 2007. 12 57 AM IST
Ahead of a planned mega merger with domestic airline Indian, state-owned international carrier Air India has embarked on a major cost-cutting exercise and is attempting to improve its revenues.
According to sources close to the development who did not wish to be identified, two measures recently announced by the airline will result in a gain of Rs150 crore, either through cost reduction or an increase in revenue.
Against its earlier practice of allowing passengers two pieces of check-in baggage weighing 32kg each, the airline has decided that the free-baggage limit on routes to the US and Canada will be 23kg (each for two bags).
Passengers whose bags weigh more than 25kg but less than 32kg will be charged $25 (Rs1,075) a bag. The airline expects this move to generate around Rs10 crore in revenue annually.
From mid-March, Air India has reduced the number of cabin crew on all its flights by between two and four. For example, the cabin crew in an Air India Boeing 747-300 has been pruned from 15 to 11. The airline expects this to result in a saving of Rs60 crore a year.
The excess staff will be deployed in new planes that are inducted. Air India will need around 500 new cabin crew personnel every year for the next seven years.
“We are looking at every area to cut cost and enhance profitability,” said a senior Air India official who did not wish to be identified.
The airline has also outsourced its ground handling function. At Calicut, Pune, Ahmedabad and Amritsar, the ground handling has been outsourced to subsidiary Air India Air Transport Services Ltd.
And ending its 40-year-old practice of self handling at New York’s John F. Kennedy International airport, the airline has outsourced it to a foreign firm.
This has resulted in a saving of $800,000 (Rs3.44 crore) a year. Cabin crew for the low-cost carrier Air India Express have been hired on contract at 50% less than the amount paid to employees.
The airline has also reduced its staff: aircraft ratio. Five years ago, it had18,500 employees and 26 aircrafts.
Today, Air India has 15,300 employees and 48 aircrafts.
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First Published: Wed, Mar 28 2007. 12 57 AM IST
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