Financial and organizational restructuring Plan of Air India

The Minister of Civil Aviation, Shri Praful Patel informed the Lok Sabha today that the NACIL has taken the following initiatives to turnaround the performance of the company and is mainly focused on cost Reduction (Target of Rs.1500 crores) and Revenue Enhancement (Target of Rs.1200 crores).  The details of the plan are given below:

(A)                Cost Reduction

• Rationalization of loss making routes both on the domestic and international sector.
• Rationalization of meal uplifts at domestic and foreign stations.
• Reduction of contractual employment and outsourcing of work.
• Rationalization of man power at Indian and Foreign Stations by closure of certain offices.
• Return of aircraft on lease.
• Study on fuel efficiency Gap Analysis under which IATA has been appointed to make an in depth study of the Fuel Efficiencies at various levels.  The recommendations made by IATA are being considered at the highest level by a Strategic Group and are at various stages of implementation.  These measures include reduction of the weight of the aircraft, following a cost index prescribed by IATA both on domestic and international routes, implementation of a computerized Flight Planning & Power Units, optimization of reserve fuel carried on board etc.
• Rationalization of wage agreements including PLI Scheme.

(B)                Revenue Enhancement

• Increase in Passenger Revenue through improved marketing initiatives.
• Increase in Cargo Revenue through better utilization of belly space on line flights and cargo freighters.
• Initiative for on board revenue.
• Increase in excess baggage revenue.
• Entrusting Engine MRO/Line Maintenance to a separate Strategic Business Unit resulting in better utilization of capacity and optimum utilization of manpower resources.
• Alternative use of properties.
• Aviation Training Services.

NACIL is reviewing its network strategy with an objective to improve the overall economics of operations with the help of experts.  During the past one year or so, NACIL has withdrawn flights on the following International and Domestic routes: Amritsar-Birmingham, Delhi-Los Angles, Mumbai-Dar-E-Sallam, Delhi-Seoul, Mumbai-Seoul, Ahmedabad-Sharjah, Chennai-Bangkok, Hyderabad-Bangkok, Nagpur-Bangkok, Guwahati-Bangkok, Delhi-Kuala Lumpur, Bangalore-Sharjah, Delhi-Lahore, Goa-Sharjah, Chennai-Sharjah, Trichi-Doha-Calicut, Calicut-Kuwait, Calicut-Muscat, Cochin-Muscat, Ahmedabad-Kolkata, Ahmedabad-Jaipur, Mumbai-Vadodara, Hyderabad-Nagpur, Calicut-Chennai and Trivandrum-Trichi.

The Minister also informed that  NACIL has decided to rationalize IC coded services and IX coded services (Air India Express) on Kerala-Gulf routes by withdrawing the IC coded services and substituting these with IX coded services as the revenue earned on IC coded services on these routes have not been adequate even to cover the cash cost of operations, while, the low cost flights operated under IX code have given operating surpluses.  This is aimed at improving the overall profitability of NACIL.  However, the restructuring would result in an increase in the seats offered by NACIL on the Kerala-Gulf routes from 26100 seats per week in summer 2009 schedule to 26400 seats per week.

In order to reduce the losses and to improve profitability of NACIL’s operations, several similar changes have been implemented to the schedule IC/AI coded services on the India-Gulf routes in order to cut back loss making routes and enhance the profitable ones.  However, NACIL offered more seats now although under a single class configuration.

(c) Centre for Asia Pacific Aviation. Date posted: 20-Nov-09

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