AIRASIA CHARTS 3 STEPS TOWARDS PROFITABILITY
AirAsia India, which is trying to become independent of its promoters and generate enough revenue to sustain itself, will follow three steps to achieve its target, according to Chief Executive Officer Amar Abrol.
The airline, which yet to record a profitable quarter, is a joint venture between Malaysian low-cost carrier AirAsia Bhd and Tata Sons.
“At one point of time we have to generate enough cash flows ourselves and not remain dependent on the promoters’ investment,” said Abrol, while refusing to give a timeframe on this.
The airline, which aims to double its revenues by 201718, recorded a loss of ~181.70 crore in 2015-16, higher than the ~133.31 crore in the previous financial year.
“The promoters have invested and it is natural for them to expect returns. We are on the right path towards profitability,” Abrol said, adding that as CEO, convincing the promoters for adequate funding was one of his crucial roles.
“We are a board-run company, and you have to convince the board about your plans, about the requirements for more money. It’s a handson operational experience,” he said. The company has charted a three-step process in achieving the target: Clocking a gross profit margin first, becoming cash-flow positive and turning profitable at the level of EBIT (earnings before interest and taxation). According to Abrol, the company has recorded a gross profit margin for December and January and also expects similar results for February. The gross profit margin measures the profit a company makes from its sale of goods. In December, the airline’s revenue from sales crossed ~100 crore, the first time in its history. Similarly, it was able to increase its pricing power, recording a RASK (revenue per available seat kilometre) of ~2.85 —its highest since inception.
“From aircraft spare parts to the napkins in the cabin, we are renegotiating every contract with the vendors. We are trying to keep our planes in the air as long as possible,” Abrol said. The company, which has eight aircraft and 58 daily flights, aims to have 20 aircraft by the middle of 2018. For that the airline has selected Dublin-based Avolon Aerospace for its new aircraft through a competitive bidding process, a change from the earlier practice of leasing planes from parent AirAsia Bhd.