Air India in profit!!

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Sumeet Kumar Sharma, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur

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FY-16 might turn out to be historical for Air India, as it is expected to report an operating profit of Rs 8-10 crore. But the carrier’s would still be making gross loss, although limited to around Rs 2,600-2,800 crore, significantly lower than in FY15 when they were Rs 5,574.47 crore. This is the first year since the merger that it will make a small operating profit.

The airline is looking to add flights both on international and domestic routes. Air India’s revenues for FY 16, however, are expected to remain flat since yields on both domestic and international routes have fallen following lower ticket prices.

There has been a 9-10% drop in yields although passenger load factor has increased. It is expected that the current year could see a rise in revenues of 10% since capacity would increase.The reduced losses are the result of the sharp drop in fuel prices, which have fallen by close to 56% since March 2014. Moreover, the full-service airline has also utilised its aircraft more efficiently. While wide-bodied aircraft now fly 13 hours a day, the narrow-bodied Airbus aircraft fly around 11 hours a day. Moreover, better planning is allowing Air India to operate more flights on different routes without adding to the fleet.

Air India hopes to bring down its net losses to less than `2,000 crore in FY17, enabling the carrier to turn cash positive in FY17-18. The airline expects to earn `2.5 crore each from the sale and lease-back of nine Dreamliner aircraft from American aircraft manufacturer Boeing. The deal is supposed to be completed in the next few months. After the delivery of the Dreamliner aircraft, Air India is expected to increase flights to places like Singapore, Nairobi, Dar-e-Salaam, Madrid, Barcelona and Stockholm. Later this year — July 4 or August 15 — Air India is expected to start its first direct flight between New Delhi and Washington. The national carrier will receive the delivery of 10 ATR 72 aircraft in the current fiscal year, which will help the airline expand on domestic routes to tier 3 and 4 cities like Bhavnagar, Nashik, Hubli and Jabalpur.

Near future one can hope to see the carrier making net profit with the efficient scheduling and fuel price drops, accompanied by new aircraft carriers with increased capacity and number of flight.

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