Air India has 5 times more debt than Jet Airways, 16 times than IndiGo: A comparison in 15 charts

The disinvestment plans of national carrier Air India are back in news and the government is making all the right noises.

Making a case for the sale of the airline, union finance minister, Arun Jaitley said in Dialogue@DDNews programme, "In this country, if 87 or 86 percent flying can be handled by the private sector... then they can also do 100 percent." Jaitley further said about Rs 50,000 crore of tax-payers' money that has been pumped into the airline so far could have been invested to improve the education sector.

Representational image. PTI

Representational image. PTI

Indeed a valid point, especially considering India's education budget has remained at a lowly 0.5 percent of GDP over the last few years.

What Jaitley said is by and large correct. A look at the air traffic data available from the Directorate General of Civil Aviation (DGCA) shows that Air India's market share has been on a declining course. From 20.2 percent in 2013-14, the airline's market share shrank to 17.8 percent in 2015-16. according to DGCA data.

Of the 10.38 crore passengers carried by Indian carriers in 2015-16, Air India accounted for 1.85 crore, Jet Airways 2.33 core and budget carrier IndiGo 3.31 crore. IndiGo has witnessed a steady increase in its market share from just 14.1 percent in 2010-11 to 32 percent in 2015-16.

Firstpost did an analysis of various parameters of three leading airlines in the country--Air India, Jet Airways and Indigo--in the context of Air India's selloff plan. Air India and Jet Airways are full service carriers while IndiGo is a budget carrier that is making profit and by far the best performer in the sector.

Air India's revenue growth has largely been in single digits over the last six years. Only once did the company post a double digit growth of 21.2 percent - in 2013-14. Meanwhile, its private sector counterparts Jet Airways and IndiGo have mostly witnessed double digit growth. IndiGo is an outlier with consistently showing growth above 15 percent and up to 65 percent.

When it comes to net profit, IndiGo is the one which has consistently been in the black. Jet Airways has witnessed an improvement in the 2015-16 and 2016-17, posting profits. Air India has been consistently in loss. However, the good news is that the company has been steadily improving its financial position from 2013-14. In 2016-17, the company is expected to narrow its loss to Rs 1,989 crore from Rs 6,280 crore in 2013-14. In 2015-16, the loss stood at Rs 3,837 crore. The improvement has been attributed mainly to benign crude oil prices. However, that's a minor reprieve because its accumulated losses as of 2016-17 is a whopping Rs 43,370 crore. And also, with the rising geo-political tensions in the Gulf region, it remains to be seen whether the company will indeed be able to retain the momentum.

The one figure that has turned out to be the millstone around the national carrier's neck is gross debt. As of 2015-16, its debt stood at a whopping Rs 51,000 crore. To put it in perspective, the number is 5.5 times of Jet Airways debt of Rs 7,223 crore and 16 times that of IndiGo's Rs 3,201 crore. Now you know why the government is struggling with the white elephant that is Air India.

This is one parameter in which Air India is scoring better. The company has managed to reduce the number of staff from 26,921 in 2011-12 to 12,880 in 2015-16. In 2011-12, the company saw a surge from 12,654 the year earlier due the now-controversial merger of Indian Airlines with it. However, Air India has been steadily reducing the headcount since then. The sharpest drop took place from 2014-15 to 2015-16. As of 2015-16, Jet Airways has 14,576 staff and IndiGo 12,362.

Air India's fleet size is almost the same as Jet Airways and IndiGo. While the fleet of Air India and Jet Airways has a mix of various aircraft, IndiGo has just one type - A320. This leaves IndiGo in a better position financially, according to experts because it does not need various kinds of engineering and maintenance support.

Another matrix where Air India is witnessing a major improvement is employees per aircraft. From a high of 436 in 2010-11 (when Jet Airways' corresponding figure stood at 185 and IndiGo's just 94), the number has declined to a decent 120 in 2015-16 for Air India. This is almost at par with IndiGo.

An analysis of the breakup of the employee data, throws up interesting findings. In absolute terms, the number of pilots and co-pilots has decreased for Air India from 1,543 in 2011-12 to 1,411 in 2015-16. However, as a proportion of total staff, the pilots and co-pilots strength has increased from just 5.7 percent to 11 percent during the period. Meanwhile, for Jet Airways and IndiGo, the proportion has been consistently in double digit level. In 2015-16, the two private airlines had 13.3 percent and 14.1 percent of their total staff as pilots and co-pilots.

The number of cabin crew witnessed a decline in Air India in 2014-15 and 2015-16 to 2,321 and 2,116 while the private counterparts had a higher number of around 3,000. As a proportion of total staff strength, Air India's cabin crew remains below 16 percent. However, Jet Airways and IndiGo have 20-30 percent of their total staff as cabin crew. The lower number of cabin crew is likely to affect the onboard services of the national carrier. According to Gokul Chaudhri, leader - direct tax, BMR & Associates LLP, the services in an Air India flight has never been on par with the private sector rivals. "However, it also has to be found out whether Air India staff is getting the same level of training and motivation that Jet and IndiGo staff are getting. That too will impact the service quality," he said.

Air India's maintenance and overhaul staff have seen a drastic decline to just 913 in 2015-16. However, this is because it has transferred staff under this department to subsidiary Air India Engineering Services. Before the transfer, the proportion of maintenance staff to overall headcount was much higher - nearly 30 percent. In comparison, Jet and IndiGo have had only around 15 percent and below 10 percent staff for this function.

One intriguing fact as far as Air India's staff count analysis is concerned is the high number of ticketing and sales personnel. As of 2015-16, the company had 4,577 for this operation, which forms 35.5 percent of the total staff strength. In comparison, Jet has 1,092 and IndiGo just 65. "The lower sales personnel for private sector players could be because they are using technology better than Air India. For consumers, what matters most is accessibility and prices. Quality of technology and algorithm is better for the private sector. It is not about the personnel sitting behind the counter," Choudhri said.

Available seat kilometer (ASK) per employee is an indicator of efficiency both in terms of capacity planning and utilisation of work force and is calculated by dividing average seat kilometers by number of employees. For Air India, this number was better at 3.61 million in 2010-11, that is before Indian Airlines merged with it. Post the merger, the number fell drastically while the private sector consistently maintained better numbers. In 2015-16, Air India has managed to improve this matrix to pre-merger level at 3.96 million. This is now better than Jet Airways and IndiGo. The reason for Air India's improvement is the steep reduction in its workforce.

Passenger load factor or PLF is one of the key parameters in the aviation industry. A higher PLF implies that an airline is successful in selling available seats. However, higher PLF may not result in higher operating profit. And when it comes to Air India, despite the higher number of ticketing and sales personnel, its PLF is lower at 75.5 percent compared with Jet's 82.6 percent and IndiGo's 84 percent. Choudhri says what needs to be observed now is how Air India is using its Dreamliner fleet in its long-haul international segments. This could help the company better its performance going forward. After the San Francisco non-stop flights, Air India has plans to start more such flights in the near future. "To Washington from 7th July, Stockholm from 15th August and Los Angeles from 1 September to be followed by Tel Aviv, Dallas and Nairobi sometime later during the year 2017 itself. Air India spreads its wings far and wide," chairman and managing director Ashwani Lohani posted on Facebook recently.

Revenue per employee is an indicator of productivity of human resource of an airline and is calculated by dividing operating revenue by number of employees. The reduction in workforce has helped Air India to improve on this matrix too, just as in the case of ASK. At Rs 1.55 crore in 2015-16, the company has a clear lead over Jet Airways and IndiGo.

So also is the case with the number of departures. Despite having the same fleet size as the private sector counterparts, Air India has the lowest number of departures. This may mean that the state-run carrier is under utilising its aircraft. According to Choudhri, aircraft on the ground signifies an airline's inefficiency.

Air India's operating revenue per revenue passenger stands at Rs 5.19 in 2015-16. In the previous three years, this was above Rs 5.5. The state-run airline's figure is lower than Jet Airways and higher than IndiGo, which is a budget carrier.

From the above numbers, one thing is clear: The state-run carrier is improving its performance of some of the matrices. The biggest problem is its debt.

"It is true that the state-run company is improving its performance. But the government must disinvest it. It should function without being a state-run entity and there is scope for improvement. And as far as debt is concerned, the government will have to write off some of it. Globally, all airlines have gone through trying times and the shareholders have had to take a hair cut. Here, the government is the shareholder. There is no point in being hesitant. Debt is a creation of the past. We should look at the future," Choudhri said.


Published Date: Jun 06, 2017 01:41 pm | Updated Date: Jun 06, 2017 02:40 pm


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