Air India’s Restructuring Reaping Rewards
A major restructuring at Air India has cut loss-making routes to 25 percent of its network in the fiscal year ending March 2013, down from 69 percent in the previous year. The airline attributes the improvement to a series of steps taken to cut costs, restructure loans, strengthen management and liquidate assets, including the spin-off of engineering and ground handling as independent profit centers.
Air India has also started the process of changing its business model to a “hybrid” one, said chairman and managing director Rohit Nandan. Following a recent approval by the ministry of civil aviation to allow for charging of extras, or “unbundling,” the airline has reduced its free baggage allowance on domestic flights to 15 kg from 20 kg.
Meanwhile, the airline has launched efforts to sell or lease five of eight money-losing Boeing 777-200LRs placed into service between 2007 and 2010. “If we are unable to do that, we will fly them on an all-economy configuration of 311 seats on international routes,” said Nandan. “The [present] 238 seats [eight in first class, 35 in business class and 195 economy] make no sense.” However, he acknowledged to AIN that even though first class proved difficult to fill, the cost of reconfiguration, at $2.25 million each, makes for a challenging economic case. The airline will likely reconfigure three aircraft for VIP travel, he added.
Two 787s, of six delivered, have started flying domestic service and schedules call for the first international flight to serve Frankfurt on May 22. Next comes Delhi to Birmingham, followed by Sydney and Melbourne from August, Rome and Milan from October, and Moscow from early next year. “The 787 is crucial to Air India’s turnaround plan,” said Nandan. The airline expects eight more Dreamliners of the 27 it ordered to arrive by the end of December, taking the total to 14.
Air India’s inability to meet minimum conditions for joining the Star Alliance prompted the group to suspend its application in 2011. Nandan told AIN that Air India still considers Star membership crucial to its success in international markets. “We have limited access to all parts of the world and hesitate [to sell]…Except for New York and Chicago, for example, we have no other connection to U.S. points.”
Nandan characterized the possibility of the newly allied Jet Airways and Etihad bringing the Airbus A380 to India some time next year as a “hypothetical scenario.”
However, one airline official who spoke with AIN on the condition of anonymity said the A380 would fly from India via Abu Dhabi to London and New York.