Air India’s turnaround — announced by Prime Minister Narendra Modi in his Independence Day Speech — seems unlikely, as the national carrier has reported operating loss of Rs 246 crore during the first quarter of the current fiscal.
The first quarter loss has narrowed from Rs 316 crore during the same period last year, it is much below the airline’s expectation of making about Rs 90 crore in operating profit during the first quarter.
In contrast, all other listed airlines in the country have made net profits during the same period on the back of lower fuel prices and rising demand for travel.
The revenues during the period have increased marginally by Rs 121 crore (see chart). Marginal increase in revenues was a concern raised by the Prime Minister’s Office in its first review on July 6.
The unaudited results for the quarter was cleared by the airline board in its meeting held on September 14. The airline is awaiting its audited financial results for the full fiscal 2015-16, where it estimated to make operational profits of Rs 100 crore.
“Revenues not picking up are surely a concern, as this is impacting the overall performance of the airline,” said a ministry official, who did not want to be identified.
Analysts feel that the airline has always been in turnaround mode but cannot turnaround unless the real problems are addressed. “It is believed that Air India’s problem can be addressed by giving it money, which is not the case.
The airline has systemic problems and it cannot turn around unless those problems are addressed.
The airline surely has shown improvement by reducing its losses but that is not commensurate with the benefits that includes lower fuel price and growing demand,” said Jitendra Bhargava, former executive director of Air India. An email sent to the airline on the issue did not elicit any response till press time on Tuesday. Air India has a huge debt burden and that is one factor impacting any turnaround prospects, its management had told ET earlier. It shells out Rs 4,000 crore annually to service debt.
In an interview to ET in July, Air India chairman Ashwani Lohani had said: “Air India today has to annually pay Rs 4,000 crore to banks to service debt. It is a huge amount of money and profitability would be much easier if you remove that. I am committed to making the airline profitable on a year-on-year basis, but some debt restructuring needs to be done.”The national carrier is renegotiating with banks to restructure Rs 10,000 crore of the Rs 45,000 crore debt. As part of the bailout package, the government is also infusing and amount of Rs 30,231 crore till 2021-22. Kevin Hogan Womens JerseyShare This