Mumbai: Union civil aviation minister Ajit Singh has set up a committee to identify routes on which state-owned airline Air India Ltd is making losses and find out why it’s doing so.
“We are losing money on short-haul international flights such as Riyadh, despite high-seat occupancy. We have to look at the reasons for this. The proposed task force will also inspect ways and means to cut wasteful expenditure, including areas such as flying allowance and crew layover,” Singh said, adding that he would soon set up another task force to examine more cost-cutting measures.
In mid-April, the government announced a Rs 30,000 crore bailout package for 10 years for Air India, which had a debt of Rs 43,777 crore as of 31 December.
Flight path: Civil aviation minister Ajit Singh (Pradeep Gaur/Mint)
The airline has accumulated losses of Rs 20,000 crore over the past four fiscal years, and a section of pilots of the carrier have been on strike for the past 36 days, demanding better career progression.
Mint’s PR Sanjai talks about the Civil aviation minister Ajit Singh setting up a committee to find out loss making routes of Air India, which will be followed by formation of another task force, that will examine further cost cutting measures
The Indian Pilots’ Guild (IPG) is demanding that erstwhile Indian Airlines pilots be barred from training on the Boeing 787 Dreamliner jets being acquired by Air India. It wants only Air India pilots to train on the expensive aircraft, arguing the planes were ordered before the merger.
In 2007, Air India and Indian Airlines, both state-run companies, were merged into a new entity called National Aviation Co. of India Ltd, which was later renamed Air India Ltd. Air India has about 30,000 employees.
Following the start of the strike, Air India has terminated the services of 101 pilots and deregistered IPG as a trade union. The state-run airline has incurred a revenue loss of more than Rs 350 crore because of the strike.
“The more you fly, the more you make losses. At this point of time, this strike is a blessing in disguise,” said a senior civil aviation ministry official, requesting anonymity.
A senior Air India executive, who also requested anonymity, said the airline has been losing approximately Rs 10 crore a day for one month.
“However, costs saved due to fuel, landing, catering, parking and hotel accommodation charges may be nearly 90% of the revenue losses estimated,” he said.
He added that Air India has started cutting loss-making routes as instructed by the civil aviation ministry.
“Normally, if routes are losing too much money, an airline announces the last date of the flight (normally at least six months ahead for international flights) and stops selling seats. Airlines do this all the time,” said Craig Jenks, head of New York-based Airline/Aircraft Projects Inc., a firm that is actively involved in strategic work for both airlines and governments.
He said shutting routes at short notice is quite a different proposition, very disturbing to passengers and often involves issues with supplier contracts.
Cash-strapped airline Kingfisher Airlines Ltd has also decided to continue with its “temporary holding plan”, which envisages fewer planes and flights, citing low demand in a slowing economy.
Under the so-called holding plan, Kingfisher Airlines began its 2012 summer schedule with about 120 daily flights operating from 20 aircraft. The airline has been forced to curtail flights from 374 per day that it operated in September with a fleet of at least 60 planes because of heavy debt and accumulated losses.
The country’s largest airline by passengers carried, Jet Airways (India) Ltd, has also started cost-rationalization measures, including hiring local pilots instead of highly paid expatriate pilots.