Air India Beats Market Expectations; Set To Turn Profitable 2 Years Before Schedule


Air India Star Alliance

Air India, India’s state run airlines, and India’s #3 largest airline in terms of passenger intake, is all set to turn tables before anyone had imagined. As per reports emerging, Air India will become profitable in this fiscal year itself, which would be 2 years before schedule.

In fact, such is the optimism within Air India, that Govt. has approved their plans to induct 100 leased planes in the next 4 years.

Last week, Civil Aviation minister A Gajapathi Raju had informed Lok Sabha that Air India has already made an operational profit of Rs 8 crore this fiscal year after reducing operational expenses by 11%. And this announcement had surprised aviation experts who were expecting this turnaround in 2017-18 fiscal year.

As a result of this unexpected profits, SBI Capital Markets Ltd has now revised Air India’s turnaround plan (TAP) and financial restructuring plan (FRP). Ministry of Civil Aviation has roped in SBI Capital Markets to figure out the time needed for Air India to get back into shape.

Now, as per the revised TAP & FRP, Air India is expected to make profit after tax in 2018-19, against their earlier expectations of 2021-22.

Reasons for Air India’s Turnaround?

As per aviation experts, there are primarily two reasons which enabled Air India to post profit before time: lower fuel costs, hence less operational expenses; and more passengers.

During 2015-16, Air India saved Rs 720 crore or 9% of the overall expenses due to low fuel cost, as per global market rate. Last year, Air India has spent 30% of the total expenses on fuel alone.

And, rising number of passengers is another positive factor for Air India, which helped them to make profits after a gap of 9 years.

During 2015-16, Air India attracted 17.77 million passengers, which is almost 10 lakh more than 16.88 million passengers who used Air India n 2014-15.

But Is Everything Ok with Air India?

As per data available, Air India experienced losses of Rs 5490.16 crore in 2012-13, Rs 6279.6 crore in 2013-14 and Rs 5859.91 crore in 2014-15. Although the losses have come down, but its still there.

Despite being profitable at operational level, Air India is expected to declare losses of Rs 3529.8 crore during 2015-16 due to other factors such as maintenance of existing fleets, salaries and misc expenses. Although as part of re-structuring process, Air India has abolished two subsidiaries: ground handling and engineering, man-power costs still haunt Air India as it constitutes 10% of the overall expenses.

Besides, Air India is already under a debt of Rs 51,000 crore as of March 31, 2015.

Some experts are stating that privatization can be a solution; but as of now, let us bask in glory of Air India, a profitable state airlines of India; a luxury which very few state airlines in the world.

Sources: 1, 2, 3, 4

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