New Delhi: Air India Ltd will connect Delhi to Rome, Milan, Moscow, Melbourne, Sydney and Birmingham with direct flights in a bid to expand its footprint, one-and-a-half decades after it stopped flying to many of these cities, the airline’s chairman and managing director Rohit Nandan said in an interview. Air India will deploy its brand new Boeing Dreamliner 787s on these routes as it prepares to compete with rivals including the Etihad Airways-Jet Airways combine. Edited excerpts:
Despite strong opposition from India’s airlines and most large airports, the government has gone ahead and allowed a steep increase in the number of seats to and from Abu Dhabi, and Etihad is investing in Jet Airways. How do you respond to this new situation?
It is a challenge, it is definitely a challenge but Air India is competent to face these challenges. The changes are bound to happen and we are not living in a protectionist environment. It would be unreasonable to have that expectation. Air India and all other airlines will have to gear up.
What do you plan to do about the impact of this alliance on Air India’s finances as many passengers will now fly to the US and Europe via Abu Dhabi?
We have a different model based on direct flights (Air India operates direct flights to US and Europe). We have now been pursuing it for some time. We dismantled our Frankfurt hub a long time ago. This model of direct flights provides a better product to people. It is a better product and better price that will win.
So does the deal between Etihad and Jet not impact you at all?
Ideally speaking, which airline would not like to be protected, but that is not how the world is going to function. Our product will be superior to others and that is how we will compete. We are introducing Rome and Milan (Italy), Moscow (Russia), Birmingham (Britain) in the next three-five months, then we are introducing (flights to) Australia.
Will these flights be from Delhi or Mumbai?
We will use Delhi as a hub and as and when Mumbai will have capacity—which I am told will be soon—it will be a natural second hub for us. It has always been our hub. That will cater to western and southern India markets.
So Delhi will act as your main hub?
We would not like to have an offshore hub (a reference to Jet’s hub being Abu Dhabi). We would like to have a national hub.
Will you be using the Dreamliner 787 on these flights?
Yes, we plan to do it with 787s.
So, your focus in 2013 is going to be Europe and direct flights?
It’s basically giving value for money to the passengers. We will be doing a lot more. Air India will expand aggressively this year. We are looking at five destinations in five months. Not many airlines try that.
What happens to your domestic market share? Since you are not expanding, your market share, which has improved to 20.2% after many years, will shrink.
We will use two of our 787s this year as a premium product in the domestic market to ply on metro routes. Earlier, we were flying them on Chennai, Kolkata, Bangalore routes from Delhi, so two of these 787s will continue to cater to the domestic market from now on.
Air India had categorically said that if the increase in capacity Abu Dhabi was asking for was allowed, it would be forced to withdraw its flights from the US. Do you plan to do this now?
There is no question of cancelling US flights; if at all, we may look at expansion, provided there is a market for it. We will look at newer destinations.
But these flights have to feed off and into another airline there, right?
We will definitely have a code share or a seat (sharing) arrangement to go into the interiors with one of the US airlines.
Where do the talks with Star Alliance stand?
That remains, but we have to develop relationships with other powerful airlines. We have already signed (partnerships) with EgyptAir, Air Astana and I think this year we will be able to do more code shares and improve existing ones. Star also has to see how the Asian network as well as the Indian network fits into its scheme. I am very hopeful. It’s more of a time thing because of the 2011 setback (when Star backtracked on its commitment to induct Air India into the alliance) and we are continuously pursuing it...
Have you had talks with the other two major alliances, Oneworld and Skyteam?
No, not Skyteam and Oneworld. As of today, we are looking at Star Alliance but those (two) options are completely open to us.
Have they approached you?
They haven’t, knowing well that we are in talks with Star Alliance.
Is there a timeframe on how long you plan to pursue Star?
We can’t put a timeframe on that one. Everyone (every member of Star) has a right to say what they feel in that group and even if one member disagrees, it becomes difficult. But we are confident the environment is now in favour of Air India. It’s better to go softly and cautiously.
How are last fiscal’s numbers looking?
In March, we have done exceptionally well; our loads have been higher than IndiGo. We are neck-to-neck in other parameters. We have a lot of hope now with the 787s being released to fly. In September, we had a lot of positive energy in the company which I think will come back as soon as the 787s start flying. In 2012-13, we were Ebitda (earnings before interest, taxes, depreciation and amortization) positive of Rs.19.45 crore compared with a Rs.2,236 crore loss last fiscal. Every parameter is looking better than last year and this is despite the fact we have had a pilot strike, (unfavourable) dollar rate changes, and grounding and delayed delivery of 787s. We have done better than what we were expecting.
The net loss is set to contract?
Yes. It was Rs.7,559 crore last year, this year will have a net loss of Rs.5,198 crore. It would be a reduction of Rs.2,400 crore. The cash losses will reduce from Rs.5,884 crore to Rs.2,585 crore, which is nearly half. Our revenue this year increased by Rs.1,200 crore and yields have increased 21%. Had the 787s not been grounded, the performance would have been even better.
What are the targets for this fiscal? Do you see any further improvements on number?
Yes. The Ebitda for this fiscal is projected to be Rs.1,040 crore. This should be achievable if the 787s fly.
What support do you want from the government?
We just want the equity that has been promised to us in the turnaround plan. We are meeting and surpassing the parameters that we were supposed to meet under that plan.