Thursday, December 20, 2012

Air India asked to reduce deficit but fly new routes: Airline told to cut monthly revenue shortfall of Rs.400 crore by slashing costs related to pay, overseas offices, jet fuel

New Delhi: Aviation minister Ajit Singh has asked Air India Ltd to reduce its monthly revenue shortfall of about Rs.400 crore by implementing cost-cutting measures on expenses related to salaries, overseas offices and fuel.

Singh’s statement comes ahead of a 1 January deadline when the airline is expected to implement key recommendations on human resource integration and transfer of a section of its staff to a new engineering subsidiary. “Air India should think out of the box to change its image of being a public sector unit and transform it to a commercial organization,” Singh said in a statement on Thursday.

For October-March, Air India showed a deficit of Rs.404 crore a month with inflows seen at Rs.1,348 crore and outflows estimated at Rs.1,752 crore. “It is important the revenue generated should meet the costs incurred,” Singh said, asking Air India to go into minute operational details to cut costs, “including costs incurred on overseas offices, salaries, fuel and office expenses.”

Soon after Singh’s statement, Air India said it will fly to Agra from 26 December by launching a tourist flight in the Delhi-Varanasi-Agra-Khajuraho sector.

Singh also asked Air India to fly its brand new Boeing Dreamliner 787 planes to Indonesia and Turkey. Air India will have eight such aircraft by March in its fleet and has plans to fly them to Sydney, Melbourne and Singapore. Of the 184 Air India services, only 16 meet costs currently.

Air India has shown an overall improvement, the minister said, and its market share has also increased to 20.8% this year.

A rapid expansion on global routes with the Dreamliners, which are facing technical glitches worldwide, risk denting Air India’s credibility, according to Civil Aviation Safety Advisory Committee (CASAC) member Mohan Ranganathan.

“All bets are placed on the Dreamliner’s success,” he said, referring to the firm’s plans. “It is in the teething stage. If they start new international routes using 787 and there are disruptions, the credibility will fall and recovery will be a distant dream.”

The government has said it needs to infuse funds into Air India to prevent private air carriers from raising fares. Higher fares have dented passenger traffic, which has slumped 3% this year.

“If I do not provide this Rs.2,000 crore (to Air India), there will be greater difficulty... If AI is not kept afloat, what will happen is air fares will go up, other airline companies will simply push up their airlines because so many seats will not be available,” finance minister P. Chidambaram said earlier this month.


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