Thursday, August 24, 2017

How Ashwani Lohani, new Railway Board head, fared as Air India CMD

New Delhi: Air India CMD Ashwani Lohani  was on Wednesday appointed the head of the Railway Board. The appointment comes at a time when Indian Railways is passing through one of its most turbulent periods in recent times.

A turbulent beginning is nothing new for Lohani, who, in his own words, “is a specialist in turnaround of organisations”. He took charge of Air India in August 2015, when the airline was plagued by a pilot strike, and unresolved issues related to the Air India-Indian Airlines merger, which led to a low staff morale.

The national carrier was steered to a financial operating profit under his tenure, helped by a softer crude oil price. To examine his performance, two financial years, FY16 and FY17, have to be considered.

Data show that the airline improved efficiency in the last two years. However, it is also true that it failed to meet the target set during the turnaround plan -- on multiple parameters.

According to internal presentations that Air India submitted to the Ministry of Civil Aviation, the airline management said it has been able to increase core revenue, ancillary income and operating ratio in FY17, while it has successfully trimmed losses. The figures are significant because it indicates that the airline has bettered its performance from FY16, during which it clocked an operational profit of Rs 105 crore.

For FY17, the airline has managed to increase revenue by almost 10 per cent to Rs 22,521 crore as against Rs 20,526 crore in the last financial year. The management said that the boost from the passenger revenue came as Air India managed to use capacity more efficiently. “Capacity utilisation has improved by 6.85 per cent from 38.7 million in FY16 to 41.3 million,” the AI management said. “We managed to improve our load factor to 76.4 per cent from 75 per cent last year, it may seem marginal but consider the huge capacity deployment by private carriers on domestic routes,” a senior Air India official said.

Simultaneously the airline has managed to trim losses by 5.05 per cent to Rs 3,643 crore as compared to Rs 3,836 crore in the last financial year. “What’s noteworthy is that we have managed to reduce the loss, despite increase in fuel charges and landing charges at airports,” said a senior Air India official. Fuel expenses for the airline increased to Rs 6,330 crore- an increase by Rs 484 crore from Rs 5,845.40 crore in last fiscal. The official said that the major reason why expenses increased was due to the implementation of the Justice Dharmadhikari Committee. “The staff cost increased by Rs 202 crore as a result even though we have rationalised the staff strength as suggested,” the official said.

But, Lohani could not arrest the steady decline in Air India’s market share. “Low cost carriers started dominating with huge capacity, yields started dropping, we could not match them, but consider that we don’t function like a private player, and there are multiple complexities to handle in regards to strategic decisions which don’t exist for a private company," a second Air India official said.
23/08/17 Arindam Majumder/Business Standard