Air India to restructure routes as losses soar

The government has suggested sharp cutbacks in routes, changes in aircraft deployment and flight timings to reduce losses in National Aviation Company of India Ltd--the state-owned company that runs Air India. Apart from several domestic routes, operations on routes like London and south east Asia also need to be restructured.

The airline, which was formed through a merger of international carrier Air India and domestic carrier Indian Airlines announced in 2007, has accumulated losses of Rs 4,334 crore till March 31, of which fiscal 2008-09 will account for almost Rs 3,000 crore.

The accumulated losses include the large dues that Air India was unable to pay oil companies and airport authorities.  Government sources also said a major reason for the loss is due to the 25 to 26 per cent fall in cargo traffic this year, owing to the global economic slowdown. Sources in Air India, however, said cargo operations only account for less than 5 per cent of revenues.

Acting Chairman E Bharat Bhushan, a 1979 batch Indian Administrative Service officer, took charge today after Raghu Menon proceeded on leave late last week. 

Senior government sources said two classes of loss-making routes have been identified --ones that do not even cover fuel cost, which accounts for half an airline's operating cost, and those that don't yield returns on total operational costs.

Those in the first category deserve to be discontinued, an official said, indicating that such routes would be less than 30 per cent of the domestic routes Air India flies.

On international routes, the official said several flights to south east Asia were the largest cause for concern. Also, loads on the London flights have been dismal, since competitors Jet and Kingfisher have slots within half an hour of Air India flights. Despite flying new routes, sources said West Asia still constitutes half Air India's international revenue. The good sign, however, is that the India-New York routes have started making money. 

Last year, Air India had cut down more than 15 of its international flights to destinations like Los Angeles, London, Osaka and Seoul, apart from reducing a large chunk of its domestic capacity.

Sources in the government said as a part of cost-cutting, Air India has cut perks for all its employees over the last one year. The voluntary retirement scheme, however, that was supposed to cover 1,500 employees, has not received good response. The scheme was offered to select employees late last year.

Sources also said the merger is running six months late and the integration between employees of Air-India and Indian Airlines has only been implemented till the deputy general manager level, which leaves nearly 60 per cent of the HR integration to take place.

Air India is also expected to disclose its earnings to the government early in May when the board meeting is scheduled.