Air India CMD Rohit Nandan may get a 2 year extension

Air India’s Chairman and MD Rohit Nandan could get a two-year extension. His current term expires next month but sources tell us the Minister of Civil Aviation P Ashok Gajapathi Raju has already recommended the two-year extension for Nandan. The final decision will be taken by the Appointments Committee of Cabinet.

If Nandan’s term is indeed extended, it would perhaps be a clear signal that the Narendra Modi government wants to make sure loss making Air India is out of the red, without having to take the privatisation route. Nandan is credited with improving the performance of the loss making airline and making sure Air India becomes a member of Star Alliance on its second attempt.

Though Air India has not stuck to the turnover and loss projections of the Turnaround Plan earlier devised by the government, it has been improving its performance steadily. Airline officials cite some parameters:

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1. Till 2011-12, 69 percent or almost two-thirds of Air India’s capacity was being deployed on routes which did not even meet cash costs. Now, such capacity has come down to just a third.

2. The airline reported Rs 425 crore earning over and above its cash cost in the June quarter this year. Its operational loss in 2013-14 was Rs 3200 crore but a huge chunk of it - Rs 1800 crore - was due to depreciation since unlike profitable airlines such as IndiGo, Air India owns all its aircraft.

3. The airline has been improving performance despite its capacity being much less than what the Turnaround Plan envisaged. This plan presumed 72 narrow body planes but the airline using only 52 now.

4. The Turnaround Plan did not build in flexibility in some basic parameters. So it assumed 15-18 percent growth in air passenger traffic each year, assumed crude will remain at $85 a barrel and that the rupee will hover around Rs 45 to a dollar. All assumptions which do not hold today.

Nandan’s tenure has also seen hiving off of two subsidiaries - MRO and Ground Handling - and the painful integration process of esrtwhile Air India and Indian Airlines finally getting completed.