Chocks -on - Nugget 27 AUG, 2013
Flying phoenix : Hurray - Air India
This is one news which is Music to all Air Indians....& off course a must Read ! Enjoy !! Air Can Do It !! Some Self Appointed Messiahs of ex Air Indians, are busy raising a clarion call for a campaign to...' Save Air India ". Bizarre.
At Indian Airlines House, the headquarters of the national carrier Air India in Delhi, the mood is upbeat owing to the busy overseas travel season. From the operations offices in the lower floors to the marketing divisions on top, the building is bustling with activities.
This is in sharp contrast to the situation a year ago, when most of the staff in the building were on strike. The new-found diligence among them is reflecting on the airline's on-time performance, occupancy and revenues. This year, the expected revenue is pegged at Rs.19,139 crore, 24 per cent higher than last year.
“I have reviewed operations of Air India and found it at par with many global airlines. In this fiscal, cash surplus from operations is about Rs.1,000 crore. Also, this is the first time when the airline would be experiencing benefits of a turnaround plan initiated by banks and lenders,” said Civil Aviation Minister Ajit Singh. “The future of Air India will only become brighter as 14 new Dreamliner aircraft are inducted and new destinations opened up.”
The debt-laden airline is on a government-sponsored lifeline, which has infused equity of Rs.5,000 crore into it. Another Rs.3,574 crore is expected next year. In addition, the government has agreed to guarantee Rs.12,000 crore of non-convertible debentures to be issued to its lenders. “We had accumulated loans of Rs.22,000 crore for continuing operations. Of this, Rs.7,400 crore has been repaid through issues of debentures, which will mature in 19 years,” said an Air India official.
The debt-laden airline is on a government-sponsored lifeline, which has infused equity of Rs.5,000 crore into it. Another Rs.3,574 crore is expected next year. In addition, the government has agreed to guarantee Rs.12,000 crore of non-convertible debentures to be issued to its lenders. “We had accumulated loans of Rs.22,000 crore for continuing operations. Of this, Rs.7,400 crore has been repaid through issues of debentures, which will mature in 19 years,” said an Air India official.
With some of the dead weight on account of working capital loans removed, Air India will make considerable savings on interest payment. Since the financial restructuring plan was implemented, the airline's interest bill has fallen from Rs.380 crore a month to about Rs.150 crore a month. With the turnaround plan in place, it had been gradually reducing its running cash loss, which was Rs.512 crore in October-December 2011. In the 2013 April-June quarter, it had a cash surplus of Rs.460 crore from operations.
“The first priority for us was to ensure that the airline does not go into a borrowing spree and to bring it out of the debt trap it was in,” said a member of a panel that advises the government on restructuring the airline. The panel is led by IIM professor Ravindra Dholakia. Air India plans to implement all the recommendations of the panel in the next six months.
“We have formed a cost-cutting committee,” said Ajit Singh. “On implementation of cost-saving recommendations, the airline management expects to save another Rs.500 crore. On-time performance has gone up. I have reviewed international operations. All the flights which were losing money are now generating profit.” The turnaround plan recommends restructuring or withdrawing services where the airline is not able to cover its operating cost.
Another major plan is to hive off the airline's engineering and maintenance operations as separate entities. Though the employee unions are against the idea, the Supreme Court recently allowed the management to go ahead with it. Air India will invest Rs.150 crore in the new companies. “This will be used to upgrade facilities and purchase new ground handling equipment. Also, a new marketing arm for the engineering and MRO [maintenance, repair and overhaul] services will be created from this investment,” said an Air India board member. Air India expects these independent arms to have 50 per cent of their turnover from third-party business in five years.
To prune its fleet, Air India has practically withdrawn its Boeing 747 Jumbos and is in the process of replacing its Boeing B-777 long-range aircraft with Boeing B-787 Dreamliners. Fourteen narrow-bodied Airbus A-320s have been reconfigured into all-economy class with 168 seats—a move to compete with the no-frill carriers. “The idea is to evolve a model based on an ideal mix of low-cost carrier model while retaining the core features of a full service carrier,” said an aviation ministry official, who is a member of the Air India management. As a result, occupancy rates have increased in both economy and business classes. The airline is also planning to lease out or sell 19 aircraft that are more than 20 years old.
“Operationally, the airline has improved quite a few things. Its fuel efficiency has also improved partly because of adoption of better aircraft and partly because of better maintenance. This was the competitive edge that Air India was missing so far,” said Kapil Kaul, CEO of CAPA, an aviation industry monitoring firm.
Air India's domestic occupancy has also been on the upswing since September-October in 2012. “Air India Express has been clocking seat occupancy rate above 80 per cent for last four months,” said a civil aviation ministry official.
There are plans to unlock the potential of the airline's underutilised assets. While regularisation of the property titles it holds in Delhi and Mumbai is under way, more tenants are expected to move into the iconic Air India House at Nariman Point in Mumbai. “We will ultimately operate from just four floors in the building as commercially there is a lot of interest in the property,” said an Air India official. The airline expects to earn Rs.1,000 crore from these assets this year.
With the situation on the ground looking good, Air India is expected to fly higher in the sky. “A revival looks to be in the cards but there is still going to be a lot of competition from the Jet-Etihad alliance as well as Air Asia. Now it would need to be competitive when it comes to offering of passenger services,” said Ram Tamara, director of Nathan Economic Consultant India and an adviser to the civil aviation ministry. “All said and done passengers' needs have to be addressed on a regular basis beyond this transition period.”
How Air India turned it around
Equity infusionThe government has infused Rs.5,000 crore into the airline. Another Rs.3,574 core is expected next year. Also, the government has agreed to Rs.12,000 crore of non-convertible debentures to be issued to lenders. With some of the dead weight on account of working capital loans removed, the airline's interest bill has fallen from Rs.380 crore a month to about Rs.150 crore a month.Operational efficiency
On-time performance and occupancy rate have tremendously improved. Air India is planning restructuring or withdrawal of services that do not cover operating cost.Fleet pruning
Air India has withdrawn its Boeing 747 Jumbos and is replacing the Boeing B-777 long-range aircraft with Boeing B-787 Dreamliners. Fourteen Airbus A-320s have been reconfigured into all-economy class. It is also planning to lease out or sell 19 aircraft that are more than 20 years old.Unlocking of underutilised assetsRegularisation of the property titles Air India holds in Delhi and Mumbai is under way. More tenants are expected in Air India House in Mumbai.
On-time performance and occupancy rate have tremendously improved. Air India is planning restructuring or withdrawal of services that do not cover operating cost.Fleet pruning
Air India has withdrawn its Boeing 747 Jumbos and is replacing the Boeing B-777 long-range aircraft with Boeing B-787 Dreamliners. Fourteen Airbus A-320s have been reconfigured into all-economy class. It is also planning to lease out or sell 19 aircraft that are more than 20 years old.Unlocking of underutilised assetsRegularisation of the property titles Air India holds in Delhi and Mumbai is under way. More tenants are expected in Air India House in Mumbai.
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Source : The Week
By : Soumik Dey. Story Dated : August 24, 2013
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