Monday, December 12, 2016

Air India needs a miracle to show operational profit; turnaround plan crumbling?

Air India’s turnaround is on shaky ground and as a newspaper headline aptly said this morning, red ink is spreading on the airline’s books. After posting an operational profit for the first time in a decade last fiscal, the airline has lapsed back into operational losses of about Rs 700 crore in the first six months of the current fiscal. This means close to Rs 4 crore each day between April and September this year. All eyes were trained on the airline making up for these operational losses by ensuring flawless performance in the remaining six months of the year. But with demonetisation, fall in yields and currency fluctuation, even this may remain a pipe dream. Forget 10-fold growth in operational profit this fiscal – the airline’s stated target to achieve Rs 1,086 crore operational profit in 2016-17- only a miracle can now make Air India post ANY operational profit at all in 2016-17. In fact, the modest Rs 100 crore operational profit it showed last fiscal could well be a flash in the pan.
No operational profit or an insignificant amount will further delay Air India’s lofty turnaround plans. Remember, the airline is still far away from making any net profit and its accumulated losses as per audited accounts on March 31 this year stood at a whopping Rs 41,380.45 crore. The extent of losses can be gauged from the fact that this money would have been enough to fund India’s health budget this year since the amount earmarked for spending on health is Rs 38,026 crore in the budget. Or, this money would have gone a long way in India’s spending for agriculture and farmers’ welfare this year since the budgeted amount is Rs 44,469 crore!
A senior airline executive had told Firstpost earlier that despite losses in the first six months, Air India was on course to make some operational profit in the second half. “October to March is the time when we generate 2/3rd revenues for the full year. Besides, we expect oil prices to remain stable.” This executive had further said that in the first six months, lease rentals of the Dreamliner (Boeing 787) aircraft and a Rs 100 crore loss due to currency fluctuation had worsened matters. But his optimism was before the government’s demonetisation move. It has hurt growth in the entire aviation sector and Air India will obviously not be left untouched.
This piece in Business Standard quotes an airline executive to say that people have cancelled their advance bookings and there has been a decline of 10 percent in new bookings. “So the forecast for the next quarter remains uncertain”.
12/12/16 Sindhu Bhattacharya/F.Business
To Read the News in full at Source, Click the Headline


Post a Comment