Cash-strapped Air India looks to cut loss, eyes premium flyers in 2020

Despite growth in revenue, Air India is witnessing a cash shortfall of around Rs 200 crore every month

Air India hopes to double its savings from ticket distribution and grow revenue through better utilisation of aircraft and introduction of new flights.

The national carrier is struggling financially because of high debt. Despite growth in revenue, it is witnessing a cash shortfall of around Rs 200 crore every month, leading to delays in salaries and vendor payments. Salary for the month of December was paid on Thursday.

The airline management, however, hopes to improve its operating and financial performance this year. Renegotiation of sales and distribution contracts is helping airline save costs. 

In October 2018, Air India selected global distribution service (GDS) Travelport as its exclusive ticket distribution partner within the country. Until then, the airline relied on three companies — Amadeus, Sabre, and Travelport — for ticket distribution in India. The exclusive arrangement for domestic ticketing came into force from January after the expiry of its contract with Sabre. 

For international sales, the airline has partnered with Amadeus and Travelport, and it has secured lower rates from these companies. A GDS collects a fee from the airline for issuing each ticket.

"We look to save Rs 520 crore in 2020 through better utilisation of GDS," said the airline's commercial director Meenakshi Malik. In 2019, Air India saved Rs 227 crore on GDS costs.

Total revenue has risen 12 per cent to Rs 18,985 crore during April - November over the same period last year, and it posted earnings before interest, taxes, and depreciation of Rs 177 crore, as against a loss last year. Aircraft utilisation has improved and nine wide-body Boeing 787 and Boeing 777 planes, which were grounded because of lack of spares, are back in operation. 

The airline launched 12 international flights this year and is hoping for increased revenue from the switch of aircraft.

"We have begun using 256-seater B787 aircraft on the Delhi-Washington route and 340-seater B777 aircraft on the Delhi-London route. Previously, B787 was being used on the Delhi-London route and vice versa. Our load factor on both flights is around 90 per cent now. This move to use B777 on the Delhi-London route will help us save Rs 50 crore per year and earn an additional Rs 50 crore. So, there will be an annual net gain of Rs 100 crore," said Air India's Financial Director Vinod Hejmadi.