14 May, 2013

Massive Cost-Cutting Operation Signals Start of Time-Bound Overhaul at Air India

Press Information Bureau

NEW DELHI, 14 MAY 2013 – The Minister for Civil Aviation Mr Ajit Singh, addressing  a press conference here, has said that the Government has accepted the recommendations of Prof. Dholakia Committee Report on Cost Cutting in Air India and sent it to the national airline for immediate implementation. The Committee has made total 47 recommendations. Air India expects a saving of about 500 crores in next 6 months by implementing some of them. Air India has constituted a Committee comprising of the following members to implement the recommendations in a time-bound manner :

i) Mr Nasir Ali, Joint Managing Director, AI

ii) Mr Deepak Brara, Commercial Director, AI

iii) Mr S. Venkat, Director Finance.

The main recommendation which Air India is going to implement is to evolve a model based on an ideal mix of best practices of LCC model while retaining the core features of full service carrier. The main recommendations are given below:

1. Charging for food in the domestic sector and rationalizing it in the international sector.

2. Unbundling of services to passengers and advertisement space.

3. 0% commission and ticket booking through website.

4. Shift from full MRO to preventive maintenance and power by the hour concept–technical & efficiency audit of engineering.

5. Strict enforcement of simplified excess baggage charges.

6. Dynamic pricing and passenger upgrade.

7. Flights not meeting variable costs need to be restructured or withdrawn to eliminate additional losses and point to point rather than multi-sector operations.

8. Idle aircrafts to be used on most profitable sectors or surrendered; and underutilized assets like luxury lounges, time slots at busy International airports, land, buildings, floors, hangar space and hotels to be leased out or sold.

9. Surplus crew to be relocated as per crew pattern requirements and SOD movement curtailed.

10. As per DPE instructions, no encashment of SL and lapsable PL – also at foreign stations.

11. Temporary posting of employees should stop.

12. Transport and hotels for pilots and crew and their layover pattern.

13. Excessive and unjustified allowances to pilots and crew to be stopped.

14. Extra reimbursements should be merged with allowances within limit of 50% of revised basic as per DPE guidelines; and training should be provided to those with more than 3 years of service left before retirement.

15. Free or subsidized transport facility to be stopped and extra transport allowance over and above the normal transport allowance not to be provided.

16. Canteen services at non-factory areas to be withdrawn and at factory areas to be outsourced with revised rates.

17. Closure of 18 off-line stations and recall of IBOs.

18. 14 Flight Despatchers plus 10 EMS-QMS staff to be hired.

19. Strong accountability at all levels, efficiency audit and private investments in the long run.

The Minister said that out of six Dreamliners, two Dreamliners have already been modified for commercial operations and all 6 planes will be ready for operation by the end of this month. At a press conference here, he said Air India would get another eight Dreamliners by December this year. This will make the total availability of fourteen B-787 Dreamliner aircrafts with Air India by December, 2013.

The Minister said that the first commercial flight will restart from 15th May, 2013, for which all operational regulatory requirements have been complied with and all pilots have been subjected to the required checks before release for flight duties. The first international flight is proposed to restart from 22nd May, 2013.Air India proposes to start the following new international routes with these B-787 aircrafts:-

Ø Delhi-Birmingham-Delhi w.e.f. August, 2013

Ø Delhi-Sydney/Melbourne-Delhi w.e.f. August, 2013

Ø Delhi-Rome/Milan-Delhi w.e.f. October, 2013

Ø Delhi-Moscow-Delhi w.e.f. early 2014

On the performance of Air India during financial year 2012-13, the Minister said the total revenue during the period has increased by about 9.6% from Rs. 14,714 crores in 2011-12 to Rs. 16,130 crores in 2012-13.Air India carried 14.05 million passengers in the year 2012-13 as against 13.40 million passengers in previous financial year, which shows a growth of about 5%.

The net loss of Air India for the financial year 2012-13 has come down by about Rs. 2,261 (Net loss in 2011-12 – Rs. 7,559.74 crores in 2012-13 – Rs. 5,198.55 crores). The EBITDA has improved by 2256 crores over previous year and it stands at Rs. 19.45 crores during the financial year 2012-13 [EBITDA in 2011-12 (-) Rs. 2236.95]. Passenger Loan Factor (PLF) has shown a great upward trend. For the whole network operation, the PLF stood 72.7% during 2012-13 compared to 68% during financial year 2011-12.There is a marked improvement in On- Time Performance ( OTP). The network OTP achieved during financial year 2012-13 has been 77.1% (domestic 80.2% and international 70.8%).

The TAP milestones and actual achievements are as follows:-

Parameters	TAP Benchmark	Actual Achievements
O.T.P.	FY 2013 – 85%	FY 2013 – 77.7%
P.L.F.	FY 2013 – 69.5%	FY 2013 – 72.7%
Yield	FY 2013 – Rs. 3.53	FY 2013 – Rs. 4.25

Air India was able to achieve savings during financial year 2012-13 as under:-

Ø Staff cost due to rationalisation of the pay structure – Rs. 243 crores

Ø Booking Agency commission – Rs. 118 crores

Ø Interest on Loans and Working Capital due to implementation of Financial Restructuring Plan – Rs. 168 crores.

Air India entered into fresh contracts with Oil Companies in January, 2013 which will provide a benefit of Rs. 500 crores annually. Most of the outstanding overdues of Oil Companies are planned to be liquidated by the end of May, 2013. The total revenue is proposed to go from 16,130 crores to 19,393 crores i.e. a jump of 20.2%.The net loss is likely to come down from Rs. 5,198 crores to Rs. 3,989 crores i.e. a reduction of Rs. 1,209 crores. EBITDA is expected to go from 19.45 crores to 1040 crores.

The hiving off of Air India Engineering Services Ltd. (AIESL) and Air India Air Transport Services Ltd. (AIATSL) has begun. The MoU between the parent company and both the subsidiary companies have been signed. The Supreme Court has cleared the hiving off of the subsidiary companies and they will start functioning soon as Independent Units dealing with MRO and Ground Handling businesses.

AIESL has already started attracting third-party business in MRO from domestic as well as international airlines. They have already finalized a tie-up with Go Air and IndiGo airlines for providing MRO services and are in touch with number of other domestic and international airlines for the same.AIATSL has already started contacting various airlines in India and abroad to expand their ground handling business.

On other aviation-related matters, the minister said that Pawan Hans, the national helicopter company, has performed a remarkable turn-around this year compared to its performance during previous fiscal when it had a net loss of Rs. 10.35 crores. Pawan Hans has achieved a net profit of Rs. 7.70 crores for the financial year 2012-13. PHL has achieved the highest ever operating revenue of Rs. 458.30 crores.

Profit from its operations of Rs. 39.17 crores is also the highest ever since its formation. Compared to last financial year, PHL have flown around 1000 hours more to earn this all time high revenue. The Company bagged new orders from M/s British Gas Limited, Power Grid Corporation and Governments of Arunachal Pradesh, Himachal Pradesh, Meghalaya, Mizoram, Assam, Tripura and Sikkim. Various cost reduction measures were also taken including control in over-time, extended duty allowances and special compensation paid earlier leading to a saving of Rs. 3.20 crores. A new Eastern Region with headquarter at Guwahati was created to monitor deployments in North-Eastern Region, more efficiently.

The Government has decided to create A.N.S. Corporation from the existing Airports Authority of India for providing A.N.S. services. The Cabinet Note for establishment of C.A.A. has already been circulated and is expected to be cleared by the Cabinet very soon. It is proposed to bring C.A.A. Bill in the coming Monsoon Session of the Parliament.It is proposed to create a separate Aviation Security Force to take care of the airport security. The proposal has been finalized by the Ministry and has been circulated to other Ministries for their comments.The newly developed Chennai and Kolkata airports are proposed to be managed professionally by engaging private partners through PPP/JV route. The offers in this regard would be invited through an international bid very soon.