A whiff of hope for Air India

By rationalising the fleet, the airline has managed to get rid of some fuel guzzlers

All its problems are far from over but national carrier Air India is in better shape than it has been in a while. The airline that has been making heavy losses for several years is likely to post its lowest loss this year. Several international routes, which have traditionally failed to cover even variable cost, are now covering it.

How did this happen? Of course, lower oil prices of late have helped Air India, as they have all the other airlines. But in the case of Air India, a few other things have happened, too.

One, by rationalising the fleet, the airline has managed to get rid of some fuel guzzlers. Virtually all the B 777-200 LRs, a drain on the finances, have been phased out. The 747s operations, another oil guzzler, are now marginal. On both 777 LRs and 747, the airline actually made a loss on the incremental cost of operation. In other words, it was cheaper to keep these on the ground than to fly on most routes.

B-787s have come in and are a more efficient plane, though they gave the carrier a fair amount of trouble since it was one of the early customers to fly the plane. Today, almost 90 per cent of the losses are from its international operations.

Routes have also been rationalised. Many loss-making ones have simply been done away with. Operations to various foreign stations such as Africa and other markets where Air India could never hope to make money have stopped. In the lean season, the airline is reducing frequencies instead of maintaining the same schedule as in the past. In December, for instance, 85 per cent of the routes were meeting their variable costs, up from 26 per cent two years ago. For the whole year, 68 per cent of the routes will meet variable costs.

Overall losses will however remain, since Rs 1,800 crore (Rs 18 billion) a year is spent on depreciation and another Rs 2,500-2,700 crore (Rs 25-27 billion) goes by way of interest. In 2014-15, the government injected Rs 5,700 crore (Rs 57 billion). In total, so far, Rs 18,500 crore (Rs 18.5 billion) of the Rs 30,000 crore (Rs 300 billion) promised have been disbursed.

On the domestic side, the airline pared the size of its executive class (down from 20 to 12) and conversely increased its seats in economy. The airline has also leased some new aircraft in the all-economy configuration. This helped reduce domestic losses.

Chairman and managing director (CMD), Rohit Nandan, says the biggest change has been stability. “Not a single manday has been lost due to industrial action,” he says; this in an airline known to face industrial action twice a year. The handling of the strike (which resulted in the removal of 13-14 officials) and not taking these back sent a clear message that the management meant business.

Perhaps the biggest change has been communication between employees and the management. Barring two, cabin crew and pilots, almost all seem more positive and relatively upbeat. A senior official says the credit goes to Nandan, who started and held regular open houses with employees soon after he took over. Morale was at an all-time low when he took charge from former CMD Arvind Jadhav.

However, a lot remains to be done. Acute cabin crew shortage has — and this has been true for the past couple of months — thrown flight schedules totally off gear. Several international flights depart much later than scheduled. Some have even been cancelled due to lack of crew. Failure to recruit cabin crew (to replace those who retired) and expiry of contracts of those hired on contractual basis has led to this situation. Instilling discipline in cabin crew remains a challenge.

Niggling problems also remain on the pilot front, with differences between erstwhile Indian Airlines and Air India pilots over issues like flying time, command and seniority. A senior commander who spoke to Business Standard said passengers don’t care whether flights meet costs, variable or fixed. But they care about reaching on time and unless that is tackled, credibility will remain an issue.