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After posting losses for seven years in a row, Air India is finally getting its nose back up. By Ranju Sarkar Its disinvestment may be going nowhere, but Air India is sure coming out a big ad rough air-pocket. After swimming in the red for the past seven years, the national carrier will post net profits of Rs 21.50 crore, thanks to reductions in manpower and costs. And, ironically, it is its disgraced CEO, Mark Mascarenhas--who was suspended recently for alleged favouritism to a UK-based travel agency-that the airline should thank in part. Ever since he took over as the CEO in July 1997, Mascarenhas has gradually reduced Air India's losses. In 1996-97, the airline it reported losses of Rs 297 crore, but since, losses have been reduced gradually-from Rs 181 crore in 1997-98, to Rs 174 crore in 98-99, to Rs 38 crore in 1999-2000 and to Rs 28.5 crore in 2000-01. This is despite the fact that the airline had to bear an additional expenditure of Rs 297 crore on account of an unprecedented increase (42 per cent hike) in fuel costs during the last fiscal. If the additional liability of higher fuel costs was not there, the airline would have posted net profits of Rs 268.5 crore. Similarly, in the last fiscal, Air-India had to shell out more than Rs 100 crore to Caribjet as compensation for prematurely terminating its two-year lease for an aircraft. In fact, the payment was referred to the Central Bureau of Investigation by the Ministry of Civil Aviation. Simultaneously, the airline tried to improve its performance by scaling down manpower and making efforts to control costs and improves efficiency. Manpower was reduced-from 18,900 in 1997, it scaled down the workforceto 17,185, which is almost the same level of manpower it had in 1993-by imposing a freeze on recruitment, and by encouraging people to go on leave. Employees could go on leave for 2 years, and not get paid for that period, or come 3 days a week, and get 60 per cent of their pay. The curtailment of the retirement age from 60 to 58 also helped in reducing the head count. Cost control measures centred around downsizing of offices worldwide--for instance, it moved into smaller offices in New York, London, and even in Delhi-curtailment of perquisites, withdrawal of capacity from loss-making routes and redeploying them. Air India's Frankfurt route was cancelled and the capacity deployed on the India-Gulf sector. The cost control measures were supplemented by higher efficiency. The average passenger load factor, which indicates the capacity utilisation, increased from 70.3 in 1999-2000 to 73.1 in 2000-01. It also carried more passengers last year (3.30 million) than the year before (3.19 million). The airline increased its yield-measured in terms of the revenue per km, the ultimate yardstick in aviation-by 6.3 per cent, from Rs 24.43 in 1999-2000 to Rs 25.96 in 2000-01. No wonder, revenues increased by 10.5 per cent to Rs 4,916 crore for the year ended March 2001. Last year, it acquired two A310s on dry lease (in December 2000 and February 2001), which increased its fleet strength to 25. This allowed it to increase frequency on sectors like Hyderabad - Dubai/ Jeddah and Kazhikode - Jeddah. Air-India plans to acquire two more A310s in July, and two more over the next fourmonths, and one 747-400 in October this year. This will increase its fleet strength to 30; it plans to offer non-stop service between Mumbai and Singapore, Mumbai and HongKong, and Chennai and Hong Kong. Even with this fleet acquisition, nearly 63
per cent of the bilaterals are still unused-actually, not more than 50 per
cent of the bilaterals are used by foreign airlines; so the gap (between
63 and 53) is 13 per cent. Says an aviation analyst: ''To bridge this gap,
you need many more aircraft. The fleet expansion merely means you are
better off than what you were.'' Clearly, Air-India is on a much stronger
wicket. One only hopes that civil aviation minister Sharad Yadav doesn't
use this rationale to put off A-I's disinvestment. |
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