New Delhi: Air India, the flag carrier run by National Aviation Co. of India Ltd (Nacil), said on Wednesday that its net loss had more than doubled to Rs5,548 crore in the year ended March, sinking deeper into the red because of higher fuel prices and interest costs on aircraft loans.
The airline, which two Air India officials said has decided to stop paying all performance-linked incentives to its top 36 directors, had posted a net loss of Rs2,226.16 crore in 2007-08. The airline released its financial results after a board meeting in Chennai.
Revenue fell to Rs13,479 crore in the fiscal gone by, from Rs15,252 crore, “due to global recession, fall in load factors and passenger yields”, Air India said in a statement. The number of passengers travelling on Air India flights fell to 10.36 million from 13.21 million in the previous year.
Ground reality: A group of ministers is expected to take a call on Thursday on granting funds to bail out the Air India, which says its working would improve this fiscal with more passengers and cost-cutting measures. Abhijit Bhatlekar / Mint
The cash-strapped and debt-burdened airline, which has sought Rs5,000 crore from the government in equity and loans, set its results against the backdrop of the global economic meltdown that resulted in fewer passengers travelling. The International Air Transport Association (Iata) forecast a combined loss of $16.8 billion (Rs78,288 crore) for the aviation industry in 2008 followed by a loss of $11 billion in 2009.
Air India, which cited increased depreciation costs and foreign exchange losses because of the rupee’s depreciation besides interest costs and fuel prices, said its performance would improve in 2009-10 as a result of increased passenger demand and cost-cutting measures, including withdrawal of loss-making routes and return of leased aircraft and wage cuts.
“A lot of macroeconomists are suggesting that the bottom is near, so things may be looking up for Air India,” said Vikram Krishnan, associate partner at Oliver Wyman, a San Francisco-based aviation consultancy, in an email. “Carriers that are less reliant on higher yield (business traveller) demand are performing relatively well right now.”
Air India’s nearest rivals Jet Airways (India) Ltd and Kingfisher Airlines Ltd had losses of Rs961.41 crore and Rs1,608 crore, respectively, for the year ended March.
Air India is in the midst of a cost-cutting drive in return for a cash injection from the government. On Thursday, a group of ministers is expected to take a call on granting funds to bail out the carrier.
In the context of its huge losses, Air India has mandated Booz and Co. to look at its costs across the board. The consultant “will review the cost-saving programme of Air India and will suggest more effective measures,” an Air India spokesperson said.
The civil aviation ministry had late last month asked Air India to review the performance-linked incentives given to the airline’s top 36 officials, who include 30 executive directors and six functional directors, as part of the cost-cutting drive.
On Wednesday, the move met stiff resistance from board members who said a cut was not justified. The directors argued that they were paid much less than their counterparts in private companies, said a senior Air India official who asked not to be named.
The board decided not to change the salary structure, but won’t pay the directors the incentives until an agreement is reached on the issue. Such incentives make up at least half the salary of an executive director. “Their (directors’) PAs (personal assistants) will get a better salary now,” the AI official said.
A second Air India official confirmed the move, also on condition of anonymity. Asked about the move, an Air India spokesman said the airline would send its response to the aviation ministry. It wasn’t immediately clear when the airline would stop paying the incentive salary.
A cut in performance-linked incentives for pilots in September had led to a strike at the carrier, forcing the airline to roll back the order. The Indian Commercial Pilots’ Association has given another notice for a strike beginning 24 November on pay-related issues.