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Air India’s turnaround plan to be reviewed

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Air India is facing increasing competition from other service airlines in domestic and international routes. So, the civil ministry has asked SBI Capital Markets to review Air India’s turnaround plan in view of changes in the operating environment and the airline’s inability to reduce losses.

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  • In 2015, the airline is expected to post consolidated net loss of about Rs 5,400 crore, despite substantial savings in the fuel bill. The gains have been offset by lower than expected revenue, an increase in engineering and maintenance costs and lease rents.
  • The airline spent Rs 8,400 crore on fuel as against an initial budget estimate of Rs 9,600 crore. Its daily spend on fuel has now reduced to about Rs 18 crore from Rs 27 crore due to lower jet fuel prices.  Also now about 80% of its operations meets variable costs.
  • For 2016, Air India is targeting earning before interest tax depreciation (Ebidta) of Rs 2,000 crore, nearly four times its 2015 Ebidta. Increase in Ebdita has been factored on further gains in fuel bill, increase in load factor and yield, benefit from route rationalisation and savings from hiving off engineering and ground handling subsidiaries.

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