AI has less room for cost cuts

New Delhi: Air India’s Chief Operating Officer (COO) Gustav Baldauf’s announcement that he will carry on cost-cutting steps and turn around the airline in three years does not seem to find takers in the airline.
According to senior officials at Air India, there is nothing more that Air India can do on account of cost-cutting.
According to 2009 estimates, two major expenditure verticals were fuel cost, with 34.2 per cent, and staff cost, with 16.2 per cent.
“The fuel cost of all the airlines in India is huge because of the heavy taxes on jet fuel in the country. And there is a limit to savings on this account,” said a senior Air India official, who did not want to be identified.
“Staff cost cannot be brought down as the management has assured that there will be no salary cut and retrenchment,” added the official.
The other cost verticals of the airline are 8.1 per cent on account of interest for loans, 6.3 per cent on depreciation cost, 7.4 per cent on account of hire of aircraft.
“Since our loans are set to increase in the future, as we are taking the deliveries of more aircraft, interest payment and depreciation will increase,” said the Air India official quoted above.
The landing and navigation charges are 4.5 per cent of the total cost, which are also set to increase as the airline plans to increase its flights.
14/06/10 Mihir Mishra/Business Standard

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Categories: NACIL Jun 2010