Air India sees Rs100-cr operating profit; launches Ahmedabad-Newark-London service

16 Aug 2016


Air India launched a tri-weekly service from Ahmedabad to Newark via London on Independence Day even as the national flag carrier said it expected to post an operating profit of more than Rs100 crore for the 2015-16 fiscal.

In his Independence Day speech on Monday, Prime Minister Narendra Modi also spoke of Air India's turnaround, saying that the state-run airline is expecting to post over Rs100 crore operating profit in the 2015-16 fiscal and more than Rs700 crore in the current financial year.

"Today I can say with complete satisfaction that Air India, which used to be notoriously known for incurring losses, has improved its operations leading it to log operational profits," the Prime Minister said while speaking on the turnaround of major PSUs.

While the 2015-16 figures are still being audited and finalised, senior officials said, "We are sure to cross Rs100 crore worth of operating profit in the last fiscal, largely due to low fuel prices as well as improved performance. In the current financial year, we are projecting that this figure will jump to Rs700-800 crore."

Air India, however, is not out of its debt burden, which has swolen to Rs 52,000 crore, posing the biggest challenge for the airline with a debt servicing cost of an estimated Rs5,800 per annum.

After debt servicing, the cash gap between operating and net profit was estimated around Rs4,000 crore. The carrier had incurred a loss of Rs5,859.91 crore in 2014-15.

The Air India management has proposed conversion of debt into equity as a way out. "A proposal could be to convert the debt into equity. It is for the government to take a final call, but we have flagged it."

Air India, according to the official, is consolidating and expanding operations and would become "very good operationally in the coming months by trying to adopt a more aggressive strategy in the market".

On Air India's network expansion plans, the officials said the airline launched the Ahmedabad-London-Newark flight, months after the Delhi-Vienna and Delhi-San Francisco services. The airline is planning to double the San Francisco service from 3 to 6 days a week from 1 November.

Air India is planning to launch a flight to Madrid in January and to Washington or Toronto by April-May next year. Services are also planned to destinations such as Copenhagen, among others, the officials said.

The airline also plans to connect several Tier-II and Tier-III cities within the country, they said, pointing out that "there is a lot of space and we want to take the first mover advantage" to these destinations.

Air India has inducted three new ATR turboprop planes to serve the domestic route expansion, "orders for ten more are expected to be placed in the next week to 10 days."

The airline has also placed orders for 30 Airbus A-320s, six Boeing 787 Dreamliners and three Boeing-777s.

Over the next four years, "We will either buy or lease a total of 115 aircraft (of different types) and retire 15 old ones. So we will add 100 planes in this period," the officials said.

However, the price competition and the ''falling yields'' caused by marketing tactics have affected all Indian carriers, they pointed out. This, they said, has the potential of limiting gains for all airlines, including Air India.

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