Despite belt tightening, AI's projected loss in current fiscal is Rs 4,000 cr

New Delhi: Till last fiscal, more than two out of three Air India flights or almost 70 percent of its capacity were making cash losses. Air India operates 470-480 flights daily so about 330 flights of the airline were making cash losses till March 2012! Some of these flights were not even covering the cost of jet fuel.

But during 2012-13, this situation was vastly improved and now, only one in four turn in cash losses for the airline and all flights on its network at least cover fuel cost. And Air India’s Chairman and MD Rohit Nandan said today that the airline is targeting to bring down such flights to just 15 percent of its total capacity in the current fiscal.

[caption id=“attachment_781611” align=“alignleft” width=“380”] The airline still projects a loss of almost Rs 4000 crore in the current fiscal. Reuters[/caption]

Not only is the percentage of loss making flights being brought down significantly, AI is also targeting over 20 percent jump in total revenue to Rs 19,393 crore (16,130 crore) in 2013-14 when net loss comes down by Rs 1209 crore to Rs 3989 crore (Rs 5198 crore). EBITDA is expected to increase from Rs 19.45 crore to a whopping Rs 1040 crore.

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This performance boost is being envisaged because:

1. Passenger load factor has improved to 72.7 percent against 68 percent in 2011-12

2. Yield (revenue per passenger) has risen to Rs 4.25 against Rs 3.53 in 2011-12.

3. More people are travelling AI, on time performance has improved

4. Two subsidiaries have been hived off into separate SBUs, loss making routes are being rationalised, pilot and other allowances are being curtailed, alternate avenues of resource generation like monetization of assets are being implemented.

But despite all the good news, the airline still projects a loss of almost Rs 4000 crore in the current fiscal! It obviously needs to do a lot more to set its house in order.

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A study conducted by the Ministry of Civil Aviation last year found that all destinations in North America, Europe and UK with the exception of New York and Chicago were loss making for Air India in 2011-12. Just 13 overseas routes which AI has been flying for decades accounted for 80 percent of its total cash the losses in that year. Its total cash losses in 2011-12 were Rs 1491.25 crore, of which these 13 routes accounted for Rs 1121.07 crore.

The biggest loss making international flight was the Amritsar-Delhi-Toronto service which brought in Rs 164.25 crore in cash loss or 11 per cent of the airline’s total cash loss. Ahmedabad-Mumbai-London followed close on its heels with Rs 145.40 crore and Amritsar-Delhi-London was next with cash losses of Rs 113.28 crore.

The study found that in the A320 family aircraft used on domestic routes were also bringing in losses. Eight such flights did not even meet fuel costs, 68 others just met fuel costs but not the overall cash cost and 46 others were meeting cash costs but not total costs. For the same aircraft family being used on international routes, 17 such flights were only meeting ATF costs but not cash costs.

An airline official said there will be a fresh study on loss making routes.