Fare war hurts Air India as it posts Rs 246 crore operating loss in Q1

Airline management targets revenue growth with new flights

A sharp drop in domestic yield (average revenue per passenger) resulted in Air India posting Rs 246 crore operating loss in first quarter of FY 17 on a year-on-year basis.

The loss was however lower compared to Rs 316 crore in same period last year.

While the capacity deployed increased on both domestic and international routes, revenue growth was slow. Domestic yield fell 16 per cent on a year-on-year basis as a result of intense fare war, an Air India executive said. Air India's membership in 28 member Star Alliance has led to revenue growth but contribution is below expectation. Air India expects the alliance membership will increase its revenue by 3-5 per cent.

However, the airline management is expecting a better performance in the second half of the year. " About 60 per cent of the revenue is earned in second half of financial year. We are expanding service to San Francisco and adding new service between Delhi-Madrid. Our load factors are growing and occupancy in premium cabins too is improving," the executive added. Air India is estimating 10 per cent year-on-year on growth in passenger revenue in FY17.

According to airline officials, Air India has made an operating profit of Rs 100-110 crore in FY16, higher than the earlier projection of Rs 8-10 crore, driven by low jet fuel price.

The airline, which is under Rs 30,000-crore government bailout plan, closed its financial 2015-16 accounts recently, but the accounts are yet to be audited. Top officials confirmed that the airline had made Rs 100-crore operating profit in FY16, but refused to divulge other details.

This is the carrier's first operating profit in a decade. At a net level though the carrier is making a huge loss as its interest and maintenance cost remain high. In April government informed the Parliament that the airline is likely to post Rs 2,636 crore net loss in FY16.