The Directorate General of Civil Aviation (DGCA) has recommended giving financial autonomy to Air India Charters Ltd (AICL), the company which runs Air India Express, the low-cost brand of Air India operating in the international sector.
"From a safety perspective, it is imperative that AICL be given financial autonomy," said a financial audit report done by the aviation regulator.
The DGCA decided to go for a financial audit of all the airlines after Kingfisher Airlines grounded planes and cancelled flights without prior information. A safety audit had raised issues on the functioning of Kingfisher and AI Express. The audit of Air India is currently on.
AI Express is the international low-cost carrier subsidiary of the government carrier, and operates in West Asian and Southeast Asian countries with its base in central Kerala's Kochi. The airline operates 204 flights a week and connects 14 international destinations.
The airline, with an equity base of Rs 30 crore (Rs 300 billion), operates 21 Boeing 737-800 aircraft. Of the 21 aircraft, 17 are owned by the company, while the rest are on lease.
AI Express has accumulated losses of Rs 1,105 crore (Rs 11.05 billion) and is estimated to incur losses of Rs 430 crore (Rs 4.3 billion) in the current fiancial year. It has a debt of over Rs 3,687 crore (Rs 36.87 billion), comprising Rs 2,387 crore [Rs 23.87 billion] (long term for aircraft acquisition) and Rs 1,300 crore [Rs 13 billion] (short term).
According to an agreement with parent company Air India, the airline shares 25 per cent of the revenue with the latter. It is projected to share Rs 430 crore (Rs 4.3 billion) for 2011-12 on revenue of Rs 1,700 crore (Rs 17 billion).
AI Express has to depend on its parent company for pilots and other administrative staff. "AI Express is considered the training ground for AI pilots," said a senior AI official, who did not want to be identified.
"The airline does not have its own pilot cadre. The shortage will continue unless it creates its own cadre of pilots."
AI Express, the official added, is financially much stable than its parent company, which is under huge losses. "AI Express is estimated to make losses of Rs 430 crore, and that is exactly the amount it will pay to Air India," the official said. "If one removes that, the airline will be a profit making company."
Air India is under huge losses of Rs 20,000 crore (Rs 200 billion) and a debt of Rs 43,000 crore (Rs 430 billion). The airline is also working on debt restructuring plans with 26 banks that had lent to the carrier.
It has also asked the government to infuse around Rs 5,400 crore (Rs 54 billion) more in the current financial year. The government has already infused Rs 3,200 crore (Rs 1,200 crore infused in 2011-12) in the airline.
Will Indian airlines fly past these tough times?