Air India to have Modest Profits in FY 2015-16, focus on Higher Revenues

This fiscal, Air India, the Indian national carrier, is finally going to see the face of profits. As revealed by the Minister of State for Civil Aviation, Mr Mahesh Sharma, the carrier is well on its path to recovery following a situation of a financial mess. It is expected to earn modest operating profit of INR 8 crores in 2015-16. The carrier was given a bailout package of about INR 30,000 crores as equity funding from the government with a roadmap to make it profitable by 2021. Due to a series of measures aimed at rationalisation and efficiency of its operations, and helped by the dipping of aviation fuel prices globally has made the airline to turnaround.

It shall be noted that the carrier was reeling under the operating losses of 5,138.69 crores in 2011-12, which was reduced to Rs 2636.19 crore in 2014-15. This year is expected to show some profit, completely bridging the losses. Among some of the measures which helped achieve this task were reduction in reimbursable by 10 per cent, reducing posts in non-operational areas, strictures on use of 5-star hotels for staying during travel, operating 21 Dreamliners on sale-and-leaseback agreements, introducing new routes while cutting down on unprofitable ones, shutting down overseas offices where passenger traffic is negligible, and many others.

No Staff Cutting, Focus on More Revenue

Air India has emphasised that it will not be willing to cut down on staff numbers as it believes that it holds the key to its expansion to return profitable. Currently, the carrier has about 19000 employees and the staff expense is only 12 percent of the overall costs. It was spending INR 3100 crores in 2014-15 as against INR 3600 crores in 2011-12. This slashing of 500 crores was made possible by removing the incentives to employees related to productivity.

Air India is still reeling under the debt burden of massive INR 51000 crores with about 40 percent of this being due to loan payments for aircraft. Considering the amount of debt burden, the operating profit looks too minuscule. However, the silver lining is returning to profits which will infuse some confidence among the employees and give a hope of reducing this burden in years to come. This would become necessary if the government stake in it is not to be divested to private players.