AI to cut costs, decides to ground loss-making routes

Loss-making airline Air India has announced a slew of cost-cutting measures which include plans to cut reimbursables by 10 per cent and abolition of posts from non-operational areas.

The national carrier has also decided to discontinue loss-making routes, among others steps, to rein in the spending and return to break-even.

The use of expensive hotels or five-star hotels for stay during the travel or holding events has been restricted unless it is unavoidable and the budget for such activities has been reduced by 10 per cent as part of the measures, Air India sources said. “These cost-cutting measures are part of a two-pronged drive to speed up our return to the break-even status. The measures are aimed at cutting costs under all controllable account heads by nearly 10 per cent,” said a source.

After a long spell of losses, Air India had recorded a net profit of Rs 14.6 crore in December last on account of a healthy growth in both passengers and cargo revenues.

Air India’s total revenue rose by 6.5 per cent to Rs 2,070 crore during December 2014 as compared to Rs 1,944 crore in the same period in 2013.

The state-run airline has reduced both its operational and net loss over the last two fiscals. Its net loss came down to Rs 5,389 crore in the last financial year compared with a net loss of Rs 5,490 crore in financial year 2013 and Rs 7,559.74 crore in FY12.

AI has a cost base of nearly Rs 24,000 crore out of which nearly Rs 14,000 crore is variable and this includes fuel cost of Rs 9,500 crore.

“With the decline in fuel prices, the company plans to achieve at least a 20-25 per cent reduction in its fuel bills in the next financial year, which will be a substantial saving for the carrier,” a source said.  

The sources said that once the hiving-off process of the Air India engineering and ground-handling subsidiaries get operational and some 11,500 employees are transferred on these companies’ payrolls, it would have only 11,000 employees by the next financial year.