NEW DELHI:
After years of opprobrium for poor financial management, weak performance and
customer dissatisfaction, Air India seems
to have embarked on a flight to a turnaround. India's national carrier - Air
India - has dramatically improved itself on almost all parameters, consequently
attracting morepassengers than
its arch rival Jet AirwaysBSE 5.59 %.
The most evident indicator of Air India's aggression has been its market share or the number of passengers flown, which has increased continuously to almost 21% in November, from 15.4% of the total fliers in April.
In a media interaction, Ajit Singh, Union minister for civil aviation, ascribed the move to drastic cost rationalisation: "There is an aggressive cost-cutting plan in place for Air India to improve financials in 2013." The aim is to make Air India Ebitda positive by 2012-13, a senior aviation ministry official added.
Rohit Nandan, Air India chairman and managing director, in a recent interaction with ET, said Air India is now better placed to take on its peers from the private sector.
Nandan said several moves, including network expansion for which it has assigned a strategic group within the airline that is looking into newer markets to be created and where more flights can be added. AfterKingfisherBSE -1.39 % grounded operations, Air India has aggressively worked on its Mumbai-Delhi route and offered flights every hour till mid-morning on a daily basis, taking its flights to 18 a day, a strategy that works well for it as it targets more corporate clients on board.
"The grounding of Kingfisher has played a part in the recovery of Air India in 2012. However, one must also take cognizance of lost of systemic changes introduced by AI's managing team. In 2013, AI recovery will depend on successful implementation of the turnaround plan," acknowledges Amber Dubey, partner and head-aviation atKPMG.
The most evident indicator of Air India's aggression has been its market share or the number of passengers flown, which has increased continuously to almost 21% in November, from 15.4% of the total fliers in April.
In a media interaction, Ajit Singh, Union minister for civil aviation, ascribed the move to drastic cost rationalisation: "There is an aggressive cost-cutting plan in place for Air India to improve financials in 2013." The aim is to make Air India Ebitda positive by 2012-13, a senior aviation ministry official added.
Rohit Nandan, Air India chairman and managing director, in a recent interaction with ET, said Air India is now better placed to take on its peers from the private sector.
Nandan said several moves, including network expansion for which it has assigned a strategic group within the airline that is looking into newer markets to be created and where more flights can be added. AfterKingfisherBSE -1.39 % grounded operations, Air India has aggressively worked on its Mumbai-Delhi route and offered flights every hour till mid-morning on a daily basis, taking its flights to 18 a day, a strategy that works well for it as it targets more corporate clients on board.
"The grounding of Kingfisher has played a part in the recovery of Air India in 2012. However, one must also take cognizance of lost of systemic changes introduced by AI's managing team. In 2013, AI recovery will depend on successful implementation of the turnaround plan," acknowledges Amber Dubey, partner and head-aviation atKPMG.
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On the international front too, Air India has rescheduled some flight timings and introduced afternoon flights to international destinations, which have helped the airline to offer not only better timings, but also better onward connectivity to passengers.
Air India is also strengthening its hub operations in Delhi from where it now operates 90 flights a day, up from 54 flights a couple of years back. It will add flights on some South East Asian routes like Kuala Lumpur and is seeing strong passenger pull on its flights to Colombo and Europe.
According to data by Air India, the average yields per passenger increased 7.5% from Rs 8,210 per passenger during April to November 2011 to Rs 8,828 per passenger for the period April to November 2012, of which domestic yields showed a sharper growth at 18.4%, while it grew by 8.5% in the international segment.
Taking a lesson on on-time performance (OTP) from market leader Indi-Go, Air India, which has always been notorious for delays, attained nearly 80% OTP this year.
"This gradually gave customers, especially
corporate ones, confidence that we will take them to their destinations in time
for their work. Because of this, more passengers chose to fly with us and our market share went up," said a senior executive of Air India.
"In 2011, we dealt with 200-250 corporate clients. The number has now increased to 1,100. We will be focusing more on first and business class corporate fliers," he said.
According to experts, rival Jet AirwaysBSE 5.59 % did not use the KingfisherBSE -1.39 % opportunity as good as Air India did due to two reasons: instead of filling the gap created by Kingfisher, Jet's perception of a full-service carrier got diluted due to the co-existence of its low-cost arm, JetLite. Jet Airways brought down capacity, while both Air India and IndiGo added capacity.
Government data corroborates this by showing how Jet Airways and Jet-Lite together offered available seat kilometers (ASKs) of 17,09,235 in May, which has dropped to 12,55,302 in September. Whereas, Air India from July consistently increased capacity, which stood much higher at 11,38,300 in September.
In the wake of high ticket prices caused due to the removal of Kingfisher's capacity, the national carrier also introduced a heavy discount scheme for thirty-day advance bookings - a practice immediately followed by both Jet Airways and Indi-Go. Air India officials assure the strategy won't change going into the new year.
However, experts believe that the Maharaja's sustained recovery will not be an instant-noodles affair.
"Air India's performance has to be consistent and they can do better if they add more capacity on the domestic routes," said travel technology solutions provider Bird Group's ED Ankur Bhatia.
Air India is also trying to rationalise its head count. The airline has also undergone a debt restructuring reducing interest costs by Rs 1,000 crore per annum, even as it is taking delivery of 27 Dreamliners. But all these are long-term goals and will take time to show benefits, given the fact that the cumulative losses suffered by the airline since April 1, 2007, till March 31, 2012, were at about Rs 28,000 crore, while it has debts of around Rs 43,000 crore.
The government has already pumped in about Rs 400 crore into the airline after the financial restructuring package was announced and the bond issue of over Rs 7,400 crore, which got fully subscribed in December.
The revenue management system that Air India is now using for the past one year has helped it to manage revenues better and also to boost occupancy levels per flight. Air India says the yields have gone up for the airline by 15% on q-o-q and it is able to manage seats better on each revenue bucket.
With the ground-handling and engineering subsidiaries taking off in January this year, Air India will be left with only 9,000-10,000 employees in the commercial airliner that would help bring down the costs drastically.
One of the important things Air India has done over the past six months in fleet reconfigurations is that it has reconfigured 10 of its Airbus A320s to all economy class which has given it immense lift in terms of offering capacity for budget travelers. It has also brought down the number of business class seats on A321s from 20 to 12.
"In 2011, we dealt with 200-250 corporate clients. The number has now increased to 1,100. We will be focusing more on first and business class corporate fliers," he said.
According to experts, rival Jet AirwaysBSE 5.59 % did not use the KingfisherBSE -1.39 % opportunity as good as Air India did due to two reasons: instead of filling the gap created by Kingfisher, Jet's perception of a full-service carrier got diluted due to the co-existence of its low-cost arm, JetLite. Jet Airways brought down capacity, while both Air India and IndiGo added capacity.
Government data corroborates this by showing how Jet Airways and Jet-Lite together offered available seat kilometers (ASKs) of 17,09,235 in May, which has dropped to 12,55,302 in September. Whereas, Air India from July consistently increased capacity, which stood much higher at 11,38,300 in September.
In the wake of high ticket prices caused due to the removal of Kingfisher's capacity, the national carrier also introduced a heavy discount scheme for thirty-day advance bookings - a practice immediately followed by both Jet Airways and Indi-Go. Air India officials assure the strategy won't change going into the new year.
However, experts believe that the Maharaja's sustained recovery will not be an instant-noodles affair.
"Air India's performance has to be consistent and they can do better if they add more capacity on the domestic routes," said travel technology solutions provider Bird Group's ED Ankur Bhatia.
Air India is also trying to rationalise its head count. The airline has also undergone a debt restructuring reducing interest costs by Rs 1,000 crore per annum, even as it is taking delivery of 27 Dreamliners. But all these are long-term goals and will take time to show benefits, given the fact that the cumulative losses suffered by the airline since April 1, 2007, till March 31, 2012, were at about Rs 28,000 crore, while it has debts of around Rs 43,000 crore.
The government has already pumped in about Rs 400 crore into the airline after the financial restructuring package was announced and the bond issue of over Rs 7,400 crore, which got fully subscribed in December.
The revenue management system that Air India is now using for the past one year has helped it to manage revenues better and also to boost occupancy levels per flight. Air India says the yields have gone up for the airline by 15% on q-o-q and it is able to manage seats better on each revenue bucket.
With the ground-handling and engineering subsidiaries taking off in January this year, Air India will be left with only 9,000-10,000 employees in the commercial airliner that would help bring down the costs drastically.
One of the important things Air India has done over the past six months in fleet reconfigurations is that it has reconfigured 10 of its Airbus A320s to all economy class which has given it immense lift in terms of offering capacity for budget travelers. It has also brought down the number of business class seats on A321s from 20 to 12.
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