Low load factor may crash AI’s profit hopes

Mumbai: National carrier Air India has said it will not be able to break even at the current load factor, if fares do not move upwards. Passenger load factor has dropped by more than 25% over the past two months, a senior Air India official told ET, on the condition of anonymity on Tuesday.
The civil aviation ministry data has revealed that 33.26 lakh passengers flew last month, against 38.97 lakh in January last year, a decline of around 15%. This is worrying, given that domestic carriers are in a bad shape.
While the price of aviation turbine fuel (ATF) has fallen to July 2005 levels, ATF on Tuesday accounted for only 23% of total operating costs. When the price of crude oil was at its peak $147, ATF then accounted for 55% of an airline’s operating costs, the official added.
Over the past two quarters, other costs like parking fees, navigation charges, employees’ costs and lease rental have increased manifold. With the dollar appreciating, domestic carriers are now having to cough up a lot more.
The official said Air India has attempted all measures to increase revenue though they have been in vain. The carrier first decreased fares in January, which did not result in any increase in passenger load. When asked about the charges of cartelisation, the official said Air India has replied to the letter sent by the Directorate General of Civil Aviation (DGCA).
Today, airlines have chosen not to reduce airfares even after ATF prices have dropped by close to 4% since Monday. In Mumbai, home to the nation’s busiest airport, ATF rates are down by Rs 1,191 per kl to Rs 29,985 per kl, currently.
18/02/09 Mithun Roy/Economic Times

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Categories: NACIL Feb 2009