Challenges before Air India's new CMD

Ashwani Lohani will be looking at reviving the carrier's financial health, dealing with private competition and HR issues

Financial health: Despite generous equity infusion from government and lower crude prices Air India has been unable to cut down its loss. For 2014-15, the airline is expected to see a consolidated net loss of Rs 5,400 crore, the same as 2013-14, despite substantial savings in the fuel bill. However, those gains have been offset by lower than expected revenue and an increase in engineering and maintenance costs, and lease rents. Despite financial restructuring, the interest bill has remained unchanged at around Rs 4,000 crore, owing to bridge loans for acquisition of Boeing 787s, interest payment to oil companies and borrowings to meet shortfall in the government's equity infusion. Earlier this month Air India signed an agreement with Citibank and State Bank of India to raise $ 300 million (about Rs 1900 crore) in external commercial borrowing to meet working capital requirements.

For FY16, AI is targeting earnings before interest, tax depreciation and amortisation (Ebitda) of Rs 2,000 crore, nearly four times the FY15 figure. The executive said the increase in Ebitda had been factored on further gains in the fuel bill, increase in the load factor and yield, benefit from route rationalisation and savings from hiving off the engineering and ground handling subsidiaries.

Crowded skies:  With the entry of new domestic airlines and increased competition from foreign airlines Air India is facing the heat. The airline's domestic market share slipped from 18.7 percent to 15.3 percent in June but rose to 16.2 percent. Its average load factors of 78.8 are lower than competition and on time performance amongst the worst of all the airlines. Foreign airlines especially those from the Gulf have been poaching away its traffic as they offer wider network and better frequencies. Air India is ranked second on international routes from India behind Jet Airways and the latter has been expanding its international passengers following an equity investment from Etihad Airways of Abu Dhabi.

Human Resource issues: Air India's outgoing chairman Rohit Nandan rates maintaining industrial peace as one of the top achievements in his tenure. While the airline was plagued by strikes by pilots and ground staff Nandan's tenure saw peace between management and employees. But that is only a part of the story. Unresolved issues of Air India-Indian Airlines merger,  low morale and internal factionalism remain sore points. Staffing is another issue and though recently the national carrier hired both pilots and cabin crew  shortage has been responsible for  flight delays. The carrier also has been losing its pilots to other carriers  According to the first internal survey on employee satisfaction after the merger  about 60 per cent of respondents were unhappy with the union of the two government carriers. The survey was conducted by Air India, with help from Ernst &Young. Around 6,600 employees took part in that survey.