Return
to Story Page
To print: Select File and then Print from your
browser's menu
Rajita Bansal
Mumbai, Aug 21: Air India is likely to report Rs 80-crore operating loss in the first quarter (May-June) of the current year. This is 50 per cent higher than the Rs 35 crore recorded in the previous corresponding period.
Mumbai, Aug 21: Air India is likely to report Rs 80-crore operating loss in the first quarter (May-June) of the current year. This is 50 per cent higher than the Rs 35 crore recorded in the previous corresponding period.
According to sources, the airline is planning to scale down its annual operating loss by more than Rs 70 crore in the current year and end 1998-99 with a loss of Rs 180 crore. The slash in losses is expected through a series of measures planned by the airline to increase revenues.
Air India has embarked on a mission to upgrade its executive-class product and effect a 200 per cent growth in revenue from this segment. The national carrier earns about Rs 70 crore annually from this segment. Three years ago, this segment earned the airline more than Rs 250 crore per annum, sources said. The immediate target, therefore, is to get back to the old level and then take it forward. To achieve this, all services, including ground-handling and in-flight, are being upgraded, while aircraft is being dispensed of some seats to make the executive class more spacious. The airline is also bringing out a separate service manual for its staff, focussing on how to build a lasting relationship with its clients using this segment.
A committee has already been set up under a general manager from the commercial department. The airline's first target is public-sector undertakings and other government bodies. According to industry observers, the airline is trying hard to increase revenues so as to outweigh expenditure and the servicing cost of its term loans. The key to improve these figures may lie in the proposed automated revenue-management system, which will help the airline monitor revenue generation at the agent level. But this will be in place only in the next two to three years.
Sources said that Air India is the only airline not to have a computerised-graded fare system for its agents. Other airlines have a structured-fare system which agents can use depending on the demand. Since Air India has no such structure or a revenue-management system in place, it has virtually no control over its agents.
The airline's plans to upgrade its executive-class segment is a piecemeal solution to its problems and reeks of a myopic management attitude, where in the larger issues plaguing the airline are bypassed.
The management has once again overlooked the debt trap that it has slid into. Total short-term borrowings are Rs 1,100 crore for 1997-98 and the airline's financial plight is further highlighted by a debt-equity ratio of 4.99:1. Furthermore, for the airline to regain its stature as a global player, rapid fleet extensions are a necessity. But an acute funds shortage and any basis to leverage additional funding are proving to be a detterent. Thus, the management could well consider options such as revenue-securitisation deals and sale and lease back of old aircraft for generating working-capital requirements. A voluntary-retirement scheme to trim the operational flab also does not seem a bad idea. While privatisation through private-equity participation would be a strong medicine for the malaise - clearly the political will to go through with such an exercise is at present absent.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------