AI may cut business class seats on domestic flights

Air India may reduce business class seats and add more economy seating in its Airbus A320 planes because of poor loads in its premium segment.

The government-owned airline has 63 narrow body planes from Airbus, including the A319 and A321.

AI chairman Rohit Nandan has appointed a committee to examine issues related to aircraft reconfiguration and to study occupancy patterns and demand. The report would come in a week, Nandan said.

Kingfisher had recently announced a reconfiguration of its planes. And, for the past year, Jet Airways has been flying 60-70 per cent of its domestic routes with the no-frills Konnect brand.

About 50 of AI's narrow body planes have business class seats.

An Airbus A319 has eight business seats and the A320 and A321 have 20 each.

The argument for dropping some business class seats in favour of economy seating is because AI's domestic flights have low occupancy at the front end.

"While the load in business class is 50 per cent on  the metro routes, the overall loads in business class are 35- 40 per cent. An aircraft flies 8-10 hours daily and it does not make much sense to have business class full in only one of the flights," an AI source said.

Overall, AI had loads of 72 per cent in October, among the lowest in the industry.

Along with reducing business class seats in domestic flights, AI officials are also considering doing away with first class seats on the Boeing 777 planes, used on the long-haul

international routes to US, UK, Canada and Japan.

These have four to eight first class seats and have less than 25 per cent loads.

The first class seats may be replaced with additional business class seats on the Boeing 777.

"The committee recommendations will be sent to the board," Nandan said.

He was guarded about plans regarding reconfiguration, saying the airline may reduce or even add business class seats after factoring route-specific demand.

"I cannot say more till I receive recommendations," he said.

Said an official: "We feel seat reconfiguration will pay off in five to 10 years. All factors will have to be evaluated from a long-term perspective,including the cost."

Seat reconfiguration is expensive and could cost the airline half a million to a million dollars (upto Rs 5 crore or Rs 50 million) for each aircraft, he aded.

That could mean a cost of Rs 200-250 crore (Rs 2-2.5 billion) if it decides to reconfigure all its Airbus 320 and Boeing 777 planes.

AI's debt restructuring and turnaround plan is awaiting the central government's nod.

The government is yet to take a final call on the airlines' request for Rs 6,600-crore (Rs 66-billion) equity infusion.

AI's plan to induct 27 Boeing 787 Dreamliner planes is also waiting for approval.

The airline has debt of Rs 40,000 crore (Rs 400 billion), nearly half of which is working capital debt.

It lost about Rs 7,000 crore (Rs 70 billion) in financial year 2011.