Air India to cut loss-making routes (Lead)

June 5th, 2012 - 9:36 pm ICT by IANS  

New Delhi, June 5 (IANS) Air India may cut some of its loss-making routes under a new business plan it has worked out, sources in the civil aviation ministry said Tuesday.

“We expect either a cut in frequencies or diversion of some of the very heavy loss-making services under a new business plan that has been worked out for the airline,” the sources told IANS.

“We can no longer afford to continue on routes which do not even pay for the operation’s fuel cost.”

The move will lead to a cut the required strength of pilots and aircraft that ply on these routes.

According to a study done by the airline, only two operations out of the 175 routes flown by the airline recovers the complete cost of the flight. In the 173 routes, the airline loses money either in the form of forgoing fuel costs, cash cost or total cost.

The non-profitable routes, as per the ministry, are those in which operational costs are not recovered or operational costs are recovered but total costs are not.

The Civil Aviation Minister last week had ordered a review by a committee of senior ministry official of flights on domestic and international routes which are non-profitable.

The airlines’ plan for a route restructure might bring in some relief for the cash-strapped airline, but its current worries because of the crippled international operations remained as the standoff between the striking pilots and the management continued for the 29th day.

The airline has suffered an estimated Rs.365 crore revenue loss, which is being touted as one of the biggest suffered by the passenger carrier due to any strike.

The Indian Pilots Guild (IPG) went on strike May 8 to protest the move to train pilots from pre-merger Indian Airlines on the soon-to-be-inducted Boeing 787 Dreamliner jets.

The airline expects to stabilise its international operations through the interim plan which it implemented Friday and cut its losses to less than Rs.5 crore a day from the present Rs.10 crore.

The interim plan has axed seven international destinations including Hong Kong, Osaka, Seoul and Toronto.

In another development, the airline is expected to pay the basic salary of March to its employees. The airline was supposed to have paid the March salary by May 15, but it got delayed due to the ongoing strike.

the sources also pointed out that the section of the striking pilots might not be paid as a disciplinary action.

And despite the strike, the airline reported a healthy 82 percent load factor on its domestic flights in May.

“Our domestic load factors have gone up from 78 percent in April to 82 percent in May. This is mainly because of good on-time performance (OTP) on major routes,” a senior Air India official on the operations arm told IANS.

“We have full bookings till June 15, on a majority of our flights in the peak travel season. Another factor that has helped us is the fact that the domestic tourism sector is booming.”

According to the official, the airline expects its market share to improve due to the high load factor. However, he said that many of domestic feeder flights for international operations were hit badly.

“Our feeder flights, for example Delhi-Amritsar-London, has been hit, so have other domestic feeder flights. But we have tried to mitigate losses in these sectors as well,” the official said.

The airline had the fourth largest market share in April at 17.6 percent after SpiceJet at 17.7, Jet Airways at 21.4 percent and IndiGo at 23.8 percent.

–Indo-Asian News service

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