Air India On Right Path To Turn Profitable By FY17

Air India On Right Path To Turn Profitable By FY17

Seven years after the merger of erstwhile Indian Airlines and Air India was announced, the national carrier drew some criticism last week for celebrating Air India day on August 27 the day in 2007 when the merger process formally began.

The criticism was over alleged waste of a large amount of money when the Airline is bleeding  a charge the management has vehemently denied. While the issue is still being debated in the media, a look at Air India's progress in the last two years shows that the Airline has surely done some things right.

Air India continues to operate under losses and ended FY14 with net losses, but it reported EBIDTA positive for the second consecutive fiscal in FY14 at over Rs 700 crore, a significant increase from Rs 19 crore in the previous fiscal.
That means the Airline is on the right path to achieve its target of becoming fully operationally profitable by FY17.

The merged Air India was reeling under huge losses since 2007 and was knocking at the government's door every now and then for equity infusion to pay salaries and convince vendors to give more time for payment of their dues.

The government approved a turn around plan (TAP) entailing an equity infusion of more than Rs 30,000 crore into the Airline by 2020, if it meets certain milestones. So far, Air India seems to be on target. It is flying its planes with around 80% of its seats full and is also achieving the on time performance of over 70% required in the plan.

Air India chairman and managing director Rohit Nandan, who took over at a time when the Airline was losing around Rs 7,000 crore annually, credits it to fund availability from the government and employees support.

Things started moving in the right direction only after the Airline decided to act tough on striking Airline pilots and the approval of the TAP, providing us the financia l support, he said. Money in our accounts ensured that the employees are paid and all our vendors are paid, which ensured that our operations are not impacted. Our action against striking pilots sent a message of management, who mean business, Nandan told ET.

Disciplined operations not just got the airline passengers but also fetched it an entry into Star Alliance, the world's largest airline alliance. Airline sources say that the chance of an entry into the alliance was almost over around July 2012 due to a 58-day strike by the pilots of Air India's wide bodied planes that operated in the international sector.

The Air India management, however, persisted with their request and entered the alliance exactly two years later in 2014. Entry into an alliance not just gives Air India passenger a huge network of 27 large airlines but also provides the airline committed passengers flying to India, adding to its bottom line.

Two other major concerns were rationalisation of pay packages and promotions of the erstwhile Air India and Indian Airlines and curtailing the number of loss-making routes.

Air India has been able to rationalise promotions of employees and as a result about 2,200 employees in the airline were given promotions but not salary hikes.My promotions were due for the last so many years.

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Mohini Porwal [ B Sc]
Trainee News Editor
Indian Aviation News Editor