Air India to restructure routes as losses soar

The government has suggested sharp cutbacks in routes, changes in aircraft deployment and flight timings to reduce losses in National Aviation Company of India Ltd (Nacil) — the state-owned company that runs Air India. Apart from several domestic routes, operations on routes like London and south east Asia also need to be restructured.
The airline, which was formed through a merger of international carrier Air India and domestic carrier Indian Airlines announced in 2007, has accumulated losses of Rs 4,334 crore till March 31, of which fiscal 2008-09 will account for almost Rs 3,000 crore.
The accumulated losses include the large dues that Air India was unable to pay oil companies and airport authorities. Government sources also said a major reason for the loss is due to the 25 to 26 per cent fall in cargo traffic this year, owing to the global economic slowdown. Sources in Air India, however, said cargo operations only account for less than 5 per cent of revenues.
Acting Chairman E Bharat Bhushan, a 1979 batch Indian Administrative Service officer, took charge today after Raghu Menon proceeded on leave late last week.
Senior government sources said two classes of loss-making routes have been identified — ones that do not even cover fuel cost, which accounts for half an airline’s operating cost, and those that don’t yield returns on total operational costs.
Those in the first category deserve to be discontinued, an official said, indicating that such routes would be less than 30 per cent of the domestic routes Air India flies.
On international routes, the official said several flights to south east Asia were the largest cause for concern. Also, loads on the London flights have been dismal, since competitors Jet and Kingfisher have slots within half an hour of Air India flights. Despite flying new routes, sources said West Asia still constitutes half Air India’s international revenue. The good sign, however, is that the India-New York routes have started making money.
28/04/09 Anirban Chowdhury/Business Standard

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Categories: NACIL Apr 2009