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Cash positive by 2018: AI
Issac John / 20 April 2012
DUBAI — India’s loss-making national carrier Air India, which is getting a Rs300 billion ($5.8 billion) government equity infusion over eight years as part of a critical turnaround and overhaul plan, is on track to become cash-positive by 2018, the carrier’s Chairman and managing director Rohit Nandan said.
“Our annual operating loss of Rs17 billion will taper off to Rs230 million in five years and by 2018, the airline expects to be cash positive,” said Nandan, who was in Dubai on a short visit, told Khaleej Times.
The cash-strapped airline, which is to receive a cash infusion of Rs67.5 billion in the current fiscal year as part of the total lifeline announced by the government last week, has set into motion a massive restructuring and revamp drive, he said.
“We are on a revival mode and our fundamentals are strong,” Nandan declared. This revamp involves enhancing the airline’s on-time performance to 90 per cent from the current 71 per cent, boosting passenger load factor, or PLF, to about 73 per cent and improving yields, said Nandan.
“Our goal is to achieve a PLF of 73 per cent by 2015 and 75 per cent by 2018 on international routes,” he said.
Another focus area will be on improving aircraft utilisation to international standards, as well as improving the yield per revenue km by at least 5-10 per cent
The carrier will spin off two of its transport and maintenance, repair and overhaul units as part of a financial restructuring plan approved by the federal cabinet, move that will reduce its workforce by about 19,000 from a total of 28,000 employees at present. This will significantly reduce the 100-fleet Air India’s employee-aircraft ratio to 100 from 224 at present, Nandan said. The airline will also go ahead with a plan to buy 27 Boeing Dreamliners, which will be put on lease and saleback. In five years, Air India will add 130 new aircraft and retire 37, almost doubling its fleet to around 200. The cash infusion this fiscal year will include Rs12 billion approved last year.
The carrier’s long-awaited restructuring plan also includes loans worth Rs74 billion getting converted into sovereign guaranteed non-convertible debentures.
Nandan said banks have approved the conversion of short-term loans worth Rs110 billion into long-term loans.
Air India has accumulated losses of more than Rs200 billion in four years and has debt of Rs480 billion.
On reducing delays caused by time-consuming procedures in the transfer of patients from the UAE to India, the airline chief said Air India has been trying to streamline the process. “We are doing all we can under the IATA guidelines to address the delay,” he said.
Earlier, Air India’s Director (Commercial) G. D. Brara and Air India Regional Manager for Gulf and MENA Abhay Pathak had promised to address this problem by working out easier modalities including facilitation of medical clearance locally and easy availability of oxygen cylinders and stretchers. On compensating the relatives of the crash victims of a Dubai-Mangalore Air India Express flight, the carrier’s budget airline, Nandan the carrier would abide by the Supreme Court’s verdict. “We will comply with the Montreal Convention if the court rules in favour of the relatives of the victim,” he said.
Under Montreal Convention, airlines should pay relative of each crash victim a compensation of 100,000 Special Drawing Rights, which is equivalent to Rs7.5 million.
Nandan said families of the victims would not lose their legal right for compensation as the case is still in the court. Under Montreal Convention, air crash compensation will have to be forfeited if not availed of within two years.
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