Government mounts pressure on Air India to pull up its socks
The airline has been losing money on international routes and the Dreamliner fleet that had been inducted at a huge cost is flying at a loss on several international routes.
Loss-making Air India has been another troublesome legacy that the Narendra Modi government has inherited from the UPA regime on the economic front.
The new government has been mounting pressure on the Air India management to turnaround the loss-making airline and it has initiated steps to cut costs but the loss-making airline appears to be falling behind the target that was set as part of its turnaround plan.
The airline has been losing money on international routes and the Dreamliner fleet that had been inducted at a huge cost is flying at a loss on several international routes.
The government had granted the state-owned carrier a performance-linked bailout package of over Rs 30,000 crore in April 2012. However, the airline management has not delivered on its promise to meet the financial milestones.
According to the government approved plan, the airline is required to post a total revenue of Rs 26,889 crore in 2015-16 while its net loss is expected to come down to Rs 1,447 crore during the same period.
Air India's net debt stood at Rs 36,000 crore as of March. The airline currently pays about Rs 4,000 crore as loan payment and another Rs 3,800 crore as interest payment.
Air India had made a net loss of Rs 5,389 crore in 2013-14 compared with a net loss of Rs 5,490 crore in 2012-2013 and Rs 7,559.74 crore in 2011-12. The loss of the airline for 2014-15 is expected to be broadly of the same magnitude as the preceding two years. However, with the jet fuel prices coming down and some improvement in the operations the losses are expected to be lower in 2015-16.
Air India had a cost base of nearly Rs 24,000 crore out of which nearly Rs 14,000 crore is variable.
With the new government cracking the whip, the Air India management had announced a 10 per cent cut in allowances for its staff for travel and telephone bills, the abolition of posts from non-operational areas and decided to stop flights on chronic loss-making routes.
"Stay in five-star hotels for pilots and cabin crew or holding official events has been restricted and is to be undertaken only if it is completely unavoidable. The budget for such activities has been reduced by 10 per cent as part of the cost-cutting measures", a senior Air India official told Mail Today.