Air India set to start generating profit this year: minister
25 April 2013
National flag carrier Air India, which is currently implementing a 10-year restructuring and turnaround plan approved by the civil aviation ministry, is expected to start generating profit this year, minister of state for civil aviation K C Venugopal said today.
Under the turn around plan (TAP) and financial restructuring plan (FRP), there would be equity investment in Air India spread over 10 years, the minister informed the Rajya Sabha, adding that the government would infuse the equity against achievement of specific milestones in terms of load factors, yield and on punctuality.
The performance of Air India would, therefore, considerably improve with the operational turnaround and the national carrier is expected to emerge EBITDA-positive in 2013, he said.
Venugopal said the government has infused total equity of Rs10,000 crore in Air India from 2009-10 till date.
The minister said Air India is undertaking cost-cutting measures as recommended by a committee on accountability. In accordance with the turnaround plan approved by government, Air India has withdrawn some flights, which were not meeting the fuel cost /cash cost of operations. However, the minister said, commencement and withdrawal of flights by any airline depend upon the commercial judgment of the airline.
He further said that Air India periodically monitors the carriage/load factors/financial performance of services on its network and makes efforts to improve their performance. Whenever any service recurrently gives rise to cash losses, Air India analyses the reasons for the losses and based on the strategic importance of such services to its network, arrives at a decision whether to continue or withdraw such services.
While determining the desirability or otherwise of discontinuing operations of loss making services Air India takes into account the revenue contributions made by the subject services to its other services by way of feeder traffic.
As such non-profitability of any one flight is not taken in isolation as the sole barometer of its financial performance, he added.
A committee constituted by the government to recommend various cost cutting measures has recommended various measures, mainly relating to efficiency audit, strong accountability at all levels, operating model, rationalisation of loss making routes, dynamic pricing, passenger facilities etc, the minister said.
In this regard, he said, Air India has taken a number of pricing initiatives to widen the market base by reaching out to a new segment of price sensitive travellers. The measures include short window sale, such as 'Jaldi Jaldi' introduced in November 2012 and short term advance purchase promotion (purchase 7 days advance) on domestic network introduced from 20 February 2013 to 4 March 2013 and the advance purchase fares at 30 days (AP30) and 60 days (AP60) before departure. These initiatives have helped Air India to retain its competitive position in the market.
Fares offered by Air India are competitive and based on market considerations, such as fares offered by competitors, seasonality, extent of competition and product features like frequency, timings, direct/indirect operations etc, the minister pointed out.