Air India getting rid of Boeing Dreamliners, 777s to shore up books
14 January 2014
Loss-making national carrier Air India says it is taking steps to improve its financials, including its earlier plan of selling or leasing its 14 new Boeing 787 Dreamliners. It is also aiming to prune loss-making flights, improving fleet use, and increase web sales by March.
Operating costs have risen sharply on higher fuel prices and a weak rupee dollar, making it critical for the airline to increase savings.
The airline has sold and leased back two Boeing 787s, at a profit of $30 million, and will complete the sale and lease-back for the remaining planes by March-end. It also plans to sell its three remaining fuel-guzzling Boeing 777-200 long-range planes. It has already sold five of these to Abu Dhabi based Etihad Airways last year for about $350 million.
''We are rationalising all loss-making routes. Our fleet utilisation in the domestic sector has improved from earlier eight hours to 10 hours daily. The Boeing 787 have given positive results on routes on which the airline was incurring a cash loss. The fuel burn on these aircraft is 15 per cent lower than Boeing 777s,'' S Venkat, Air India's finance director, told newspersons in Mumbai today.
''We have been able to reduce our cash losses and we expect this trend to continue. The interest cost has reduced by about Rs250-300 crore each year,'' he added. The airline plans to turn its EBITDA positive this financial year, but challenges persist. Some big-ticket items such as asset monetisation have not generated enough revenue, with the airline earning about Rs40 crore of its targeted Rs1,200 crore, Venkat admitted.
He said the hiving off of ground-handling and engineering departments was also showing results. ''Private airlines are approaching us to carry out overhaul of their aircraft,'' he said. The airline has repair and overhaul units in Nagpur, Delhi, Hyderabad and Thiruvananthapuram. Air India will cut its head count by 17,000-20,000 after hiving off the departments.
''We have improved our load factors, time performance and yields. The load factor target has exceeded the target set in the turnaround plan,'' he said. Anil Mehta, executive director (corporate affairs), said the focus was also on increasing sales from its website. Its proportion in the total revenue has increased to 17 per cent from eight-nine per cent earlier, he said. He added the airline had begun accepting the American Express credit card to increase international sales.
The airline will also upgrade its website to allow users check expected time of flight arrivals by linking to its operational control centre. At present, customers can check an aircraft's location on the website.