How Air India Plans to Cut Costs and Losses

Air India
Air India

The Government has approved a Turnaround Plan (TAP) / Financial Restructuring Plan (FRP) for operational and financial turnaround of Air India (AI).

Currently, Air India has accumulated losses of more than Rs. 50,000 crore and debt of about Rs. 55,000 crore. The TAP / FRP provides equity infusion of Rs. 30,231 crore up to 2021 subject to achievement of certain milestones.

According to the Minister of State for Civil Aviation, Jayant Sinha, the company has made substantial progress in both operational as well as financial areas as per TAP milestones.

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Sinha said Tuesday that as part of the turnaround strategy, the company, with the overall support of the government, has initiated a number of steps in order to cut costs and losses. These steps include the following:

  • Route rationalization of erstwhile Air India (AI) and Indian Airlines (IA) and elimination of route network involving parallel operations.
  • Rationalization of certain loss making routes.
  • Enhanced utilization of new fleet resulting in production of higher Available Seat Kilometers (ASKMs).

[ Data: How Domestic Airlines in India Performed in 2017 ]

During the past three years, Air India initiated a number of steps including various phase market initiatives. The steps include the following:

1. Introduction of new routes.

2. Preferred seat selection on domestic and international routes.

3. Flash sale of seats to increase revenues and Passenger Load Factor (PLF).

4. To utilize unsold inventory/launching of airfare equivalent to Rajdhani IIAC fare on select sectors.

5. Dynamic pricing and introduction of advance purchase fare.

6. Various sales and marketing initiatives.

The share of Air India, in terms of domestic passengers, for the year 2016-17 is about 14.2% of the total scheduled operations for domestic passengers.

Photo courtesy: Air India

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Rakesh Raman