Air India’s turnaround looks unlikely as the aircraft the airline had bet on is losing money on all deployed routes.
An internal route economics analysis done by Air India shows that the airline has lost over Rs 1,800 crore on all international routes operated using the Dreamliners till January of the last financial year. This is nearly half the losses of around Rs 3,900 crore incurred by the carrier on international flights and about a third of net losses of Rs 5,500 crore estimated for 2014-15.
On the Delhi-Sydney-Melbourne route itself the airline has lost over Rs 300 crore in the first 10 months of the financial year. Losses on the Delhi-Rome-Milan flight tipped over Rs 150 crore. On the Amritsar-Delhi-Birmingham, Amritsar-Delhi-London, Mumbai-Singapore flights losses stand at Rs 125 crore, Rs 200 crore and Rs 110 crore, respectively.
Meanwhile, lower than expected occupancy levels forced Air India to halve frequencies to Moscow to two flights per week to contain losses in February this year. The Delhi-Moscow flight has piled up losses of Rs 60 crore since the carrier resumed services to Moscow in July 2014, after a gap of 15 years.
“Usually, on international routes average occupancy levels for any airline stand at around 70 per cent. Air India assumed passenger load factor (PLF) of 80 per cent, while preparing business plans on the Sydney-Melbourne route. In the Delhi-Moscow sector average occupancy has been around 47 per cent. It shows flights have been launched without proper groundwork. This is impacting financials,” a source informed.
The Delhi-Moscow route is one of the five sectors serviced by Dreamliners where flights meet fuel costs but not variable costs. Air India’s Boeing 787 flights to all other destinations meet fuel costs but not total costs. It is only on three routes, not serviced by Dreamliners, that Air India made money between April and January last fiscal. These are all mid-haul flights between Kozhikode and Sharjah, Kolkata and Yangon, Cochin-Kozhikode and Jeddah. The surplus over total costs recorded on these three routes is about Rs 11 crore.
The financials are worrying as the Dreamliners are crucial to the turnaround plan of the loss-making government carrier. Boeing claims the aircraft is 20 per cent more fuel-efficient. The 787 was inducted to do away with a route-plane mismatch in AI’s operations.
The staggering losses have come at a time when concerned about the overall health of Air India, the Prime Minister’s Office (PMO) has asked the national carrier to submit a detailed performance report on its revival plan.
“Independent directors on the airline’s board have asked for specifics of profit and loss figures, load factors across routes to determine the cause of the losses. The CMD is also monitoring the financials,” added a source in the airline.
