Air India hopes to sustain profitability
dubai — Air India, which is on a route network expansion mode, hopes to boost operating margins “significantly” this year after making a dramatic turnaround from losses in 2016.
The airline, which for the first time in nearly a decade reported an operating profit of ₹1.05 billion in the 2015-16 fiscal year, has been taking various steps such as rationalisation of certain loss-making routes, closure of overseas offline offices at certain locations, phasing out of old fleet and consequential reduction in maintenance costs to sustain profitability.
Pankaj Srivastava, commercial director and board member of Air India, said the main factors that helped to turn around the airline was increased operational efficiency and reduced oil prices. Its fuel bill in 2015-16 dropped by about ₹26 billion from a year ago. Fuel cost constituted about 24 per cent of the airline’s total cost during 2015-16 compared with 32 per cent of the total cost during the 2015 fiscal year.
Srivastava said in line with its route expansion, the carrier plans to increase domestic and international flights and boost capacity to markets including the Gulf.
In the Gulf, where Air India has a strong operation, the carrier plans to substitute smaller aircraft with larger aircraft. In line with this strategy, Air India launched a Boeing 787 Dreamliner operation between Kochi and Dubai in February, he said. The flight is Air India’s second Dreamliner service connecting India and Dubai, as the airline operates a Dreamliner on the Delhi-Dubai route.
The carrier, which has a fleet of nearly 140 planes, is also expanding its domestic network to cater to the fast growing demand by adding new aircraft to its fleet and adding new routes in 2017.
The airline plans to add four more Dreamliners by the end of 2017, and three Boeing 777300ERs by the middle of 2018, Srivastava said.
Air India, which currently has 23 Dreamliners in its fleet, plans to take five wide-body aircraft on lease. For domestic deployment, the carrier has placed an order for 29 Airbus 320 aircraft on lease, Srivastava said.
According to the Iata, India emerged as a stand-out performer by recording the highest growth of 23.3 per cent in domestic air travel demand worldwide in 2016, twice that of China. The global airlines’ grouping said the Indian domestic market topped the growth chart for the second year in a row with passenger volumes surging twice as that of China.
Domestic air travel rose 5.7 per cent in 2016. Capacity rose 5.1 per cent and load factor was 82.2 per cent, up 0.5 percentage points over 2015.
The carrier, which had come out of the red on the back of a ₹302. 31 billion bailout package extended by the government in 2012 for a 10-year period, launched 12 new flights domestically and four flights internationally in 2016.
The on-going expansion plan will see the airline adding two new international destinations and increase frequencies on domestic routes like Nagpur, Ahmedabad, Chandigarh and Leh by July 2017.
Following the commencement of direct non-stop flights to San Francisco, Madrid, Vienna and Ahmedabad-Newark via London, Air India plans to start direct flight operations on the Delhi-Washington-Delhi route in July 2017. This flight will be the fifth direct connection with the US and will be operated by Boeing 777 aircraft.
Washington will become the fifth US market Air India will serve nonstop from India with Chicago, New York and San Francisco served from Delhi and Newark from Mumbai. The airline also serves Newark indirectly from Ahmedabad via London Heathrow. Air India previously served Dulles International Airport for a six month period between December 2009 and May 2010 as a tag on its flights into New York.