Air India's books have not always been in the red. Much before the state-owned airline's numbers were written in red ink, it used to record decent profits.
Its reported net profit was Rs 96.36 crore in 2004-05. In the next fiscal, it fell to Rs 14.94 crore. And then, in fiscal 2007 it sunk to Rs 447.93 crore, only to slip deeper in 2007-08 to Rs 2,226 crore. Next fiscal, its losses swelled to Rs 5,548 crore.
The recent Air India's financials showed a net loss at Rs 5,765 crore in FY17, and is expected to be around Rs 3,500 crore in FY18 (yet to be announced). Burdened with a total debt of Rs 55,000-crore, its accumulated losses reportedly stood at Rs 46,805 crore as on March last year.
What went so wrong to push the national air carrier into the quagmire of losses?
Pankaj Pandit, a Bengaluru-based analyst, attributes Air India's losses to a lot of factors coming together. One of them was the airline's monopoly being shaken after the opening up of India's skies to domestic private airline operators in the late 1990s. He said players like Deccan Air, SpiceJet, Kingfisher Airline, GoAir and IndiGo took off in a big way in the mid-2000s, which challenged the national carrier's complete grip on the domestic market.
According to him, the new airlines ate into Air India's market share with a more efficient operational and cost structure. And thus began the rapid decline of the government-owned airline.
In its bid to retain market share, Air India began its aircraft acquisition process. That's when it skid further. It ordered a staggering 111 aircraft from the US-based aerospace company Boeing Inc, which was funded through debt.
"It was making small losses till it bought 111 aircraft. Losses just burgeoned after that. It blew so big that it became unmanageable. Initially, Air India board had passed a resolution to order 10 aircraft from Airbus. This became 111 aircraft. By what logic, only those who took the decision know. Also, these planes were not bought with their own equity but through debt. Another folly was that they were bought in a three-class configuration. Just to recover cash cost, these aircraft needed 270% load factor" said Pandit.
A former Air India employee said the Comptroller and Auditor General (CAG) has pinned most of the blame on the government but also blames the national carrier equally for the current financial mess.
21/12/18 Praveena Sharma/DNA
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Its reported net profit was Rs 96.36 crore in 2004-05. In the next fiscal, it fell to Rs 14.94 crore. And then, in fiscal 2007 it sunk to Rs 447.93 crore, only to slip deeper in 2007-08 to Rs 2,226 crore. Next fiscal, its losses swelled to Rs 5,548 crore.
The recent Air India's financials showed a net loss at Rs 5,765 crore in FY17, and is expected to be around Rs 3,500 crore in FY18 (yet to be announced). Burdened with a total debt of Rs 55,000-crore, its accumulated losses reportedly stood at Rs 46,805 crore as on March last year.
What went so wrong to push the national air carrier into the quagmire of losses?
Pankaj Pandit, a Bengaluru-based analyst, attributes Air India's losses to a lot of factors coming together. One of them was the airline's monopoly being shaken after the opening up of India's skies to domestic private airline operators in the late 1990s. He said players like Deccan Air, SpiceJet, Kingfisher Airline, GoAir and IndiGo took off in a big way in the mid-2000s, which challenged the national carrier's complete grip on the domestic market.
According to him, the new airlines ate into Air India's market share with a more efficient operational and cost structure. And thus began the rapid decline of the government-owned airline.
In its bid to retain market share, Air India began its aircraft acquisition process. That's when it skid further. It ordered a staggering 111 aircraft from the US-based aerospace company Boeing Inc, which was funded through debt.
"It was making small losses till it bought 111 aircraft. Losses just burgeoned after that. It blew so big that it became unmanageable. Initially, Air India board had passed a resolution to order 10 aircraft from Airbus. This became 111 aircraft. By what logic, only those who took the decision know. Also, these planes were not bought with their own equity but through debt. Another folly was that they were bought in a three-class configuration. Just to recover cash cost, these aircraft needed 270% load factor" said Pandit.
A former Air India employee said the Comptroller and Auditor General (CAG) has pinned most of the blame on the government but also blames the national carrier equally for the current financial mess.
21/12/18 Praveena Sharma/DNA
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