'Air India to return to operating profit in FY16'

Govt officials say airline might record operating profit of about Rs 1,000 crore this year

Mahesh Sharma, minister of state for civil aviation, on Wednesday said Air India was likely to post an operating profit in 2015-16.

“The government is committed to the revival of Air India. The country should have a flag carrier.

“In 2015-16, the airline is expected to register an operating profit for the first time in 10 years,” he told Business Standard in New Delhi.

Government officials said the airline might record an operating profit of about Rs 1,000 crore (Rs 10 billion) in FY16.

At a meeting with junior ministers on Tuesday, Prime Minister Narendra Modi had sought a road map for the revival of the airline, sources said.

In the last week of February, he had written to Air India, asking why the national airline wasn’t able to post profits and whether the carrier needed government assistance to break even.

The letter also enquired about the market share of the airline and raised concern over why Air India was losing ground to its private peers.

Sharma said in its reply to the Prime Minister’s Office, the airline management had sought the government’s financial support to break even in the next three years.

Though the earnings for 2014-15 haven’t been announced yet, it is expected Air India will incur an operational loss for that period.

For 2013-14, it had registered an operational loss of Rs 2,123 crore (Rs 21.23 billion), against a loss of Rs 3,807 crore (Rs 38.07 billion) in 2012-13 and Rs 5,140 crore (Rs 51.4 billion) in 2011-12.

As part of the restructuring plan, the government had, in April 2012, announced it would put in equity of Rs 30,000 crore (Rs 300 billion) in the carrier till 2020-21.

Of this, Rs 18,400 crore (Rs 184 billion) has already been pumped in.

The government, however, has been trimming budgetary support to the airline and pushing it to break even.

Last week, Air India had said it might post an operating profit in 2015-16 due to ‘an improvement in operating performance and a reduction in fuel costs’.

An Air India spokesperson said return to profitability and on-time performance would be the drivers of the airline’s operations in 2015-16.

The airline expects seat occupancy of 77.7 per cent on domestic routes and 73 per cent on international flights, passenger revenue of Rs 17,000 crore (Rs 170 billion) and overall revenue of Rs 21,500 crore (Rs 215 billion) in 2015-16.