Mumbai, Aug 18: Air India's first-quarter operating revenues, comprising May, June and July, are nearly Rs 100 crore more than what the airline had garnered in the corresponding period in 1997-98. The airline has also embarked on a focused initiative to increase revenues from its executive-class product by more than 200 per cent--targeting to go back to the levels it had achieved two years back.
But despite a better showing, Air India's total borrowings in the first quarter of 1998-99 have gone up by over 55 per cent to over Rs 80 crore from Rs 53 crore last year.
According to industry observers, the reason for this anomaly is that the airline's expenditure and cost of servicing its term-loans far outweighs the revenue generated from passenger and cargo traffic. 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 for tickets. Since Air India has no such structure or a revenue-management system in place, it has virtually no control over its agents.
Meanwhile, the airline has started work on a financial revival package which includes a private placement and securitisation deal. But since these measures will take a while, the airline is going ahead with small, yet significant, measures like improving its premium-class revenues. Sources say that the airline, at present, makes only around Rs 70-odd crore from this class as against the Rs 250 crore it used to earn two years back.
The immediate plan is to upgrade the executive-class product and the inflight and ground services attached to it. A separate committee has already been set up under a general manager from the commercial department. The airline's prime targets are public-sector undertakings and other government bodies.
To streamline this, Air India plans to bring out a separate manual for service units so that it can at least reach its 1996 levels of revenue earnings from the executive product.
INSIGHT
In privatisation lies the answer
As a result of the steep increase in borrowings, with total short-term borrowings of Rs 1,100 crore for 1997-98, Air India's precarious financial position is highlighted by a debt-equity ratio of 4.99:1. The move by the airline to rationalise routes, however, seems to be helping, as is evident from the increase in operational revenue.
But for Air India to regain its stature as a global player, rapid fleet extensions are a necessity. The management would do well to consider various options such as revenue securitisation deals and sale and lease back of old aircraft, as alternatives for generating working-capital requirements, rather than taking on additional debt. A voluntary retirement scheme to trim operational flab also does not seem a bad idea. While privatisation of Air India, 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.
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