Air India axes Moscow route within months of resumption
10 March 2015
As cash-strapped national carrier Air India continues to restructure loss making flights to cut costs, it has axed its Delhi-Moscow service, where frequencies were already halved last month because these flights did not meet variable costs. This means these flights were not meeting even their fuel costs.
The Moscow route, which was opened in July last year, marked resumption of services to that destination after a gap of 15 years. But it proved a short-lived route.
Besides its service to Moscow, Air India has also withdrawn a flight on the Delhi-Dhaka route and two flights between Delhi and Ahmedabad. These flights too were not meeting their costs. This information was given by minister of state for civil aviation Mahesh Sharma in written replies to the Lok Sabha on Monday.
The Dholakia Committee, which recommended that flights that are unable to meet their variable costs be either axed or restructured, found that this single step will get Air India maximum annual cost savings.
Minister Sharma listed out a host of cost saving suggestions made by this committee: if fully implemented, these suggestions can save the ailing airline a whopping Rs3,241 crore in annual losses.
The single biggest cost-saver for Air India is eliminating or restructuring those flights that do not meet variable costs. The Dholakia Committee has calculated savings of Rs580 crore from this single step each year.
The second biggest saver (Rs450 crore) could be dynamic pricing, something the minister of civil aviation has been asking the airline to take seriously. Another big saver could be strict enforcement of excess baggage charges - Dholakia has estimated Rs350 crore in annual savings by this measure.
Sharma said Air India has seen growth in its revenues as more passengers board its aircraft. Passenger revenue for FY15 is estimated at over Rs16,000 crore against just over Rs14,000 crore in FY14 and close to Rs12,500 crore in FY13.
Passenger load factor (which denotes the number of occupied seats on an aircraft) has also risen from 72.4 per cent in FY13 to 73.6 per cent in FY15.
Speaking to reporters last week, minister Sharma said there was no proposal at present to either look for a strategic partner for Air India or to shed the government stake in it. Instead, for the next six months the ministry will focus on getting the airline's on-time performance on track.