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Air India to shut all city offices

August 05, 2014 08:14 IST

Air India to shut all city offices

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Sharmistha Mukherjee in New Delhi

64 domestic offices under hammer even as review is on to shut another 46 globally
Air India is looking at downing shutters on all city booking offices by Oct 1, 2014.

The state-run carrier, which is saddled with burgeoning losses, has also initiated a review to gauge the viability of operating offices at 46 international destinations.

A senior executive in the airline who did not wish to be identified informed, "The city office in Madurai has already been closed.

"There is no need to maintain physical infrastructure for ticketing, cancellations and refunds at a time when most airlines are aggressively leveraging the web. It has been decided to close all city booking offices by Oct 1 this year."

Air India has city offices at 64 locations in the country.

German carrier Lufthansa maintains city offices only in Delhi and Mumbai.

"Ticketing and marketing can be realized more cost-effectively by sprucing up our website as is done by all other airlines.

"We estimate savings of Rs 18 crore (Rs 180 million) per annum in rentals and salaries from shutting down city offices within the country", added the executive.

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Image: Air India has city offices at 64 locations in the country. German carrier Lufthansa maintains city offices only in Delhi and Mumbai.
Photographs: Sahil Salvi

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Air India also maintains 46 international offices - a fifth of which are located at destinations to where the airline has no direct operations.

These include offices at Washington, Toronto, Los Angeles, Cairo, Tehran, Vienna, Amsterdam and Chittagong.

Despite recommendations from a section of the management to cut costs by closing offices at these offline stations, the airline has continued to run operations in these places claiming that they have been set up to cater to the travel needs of Indian diaspora located at these bases.

Interestingly, at six of these locations the airline also has employed on contractual basis separate general sales representatives leading to duplication of functions and expenditure.

Air India has around 170 employees stationed across offices in 46 international destinations.

"What is the need of stationing employees in international offices in places where Air India does not even have direct operations?

A review is now being undertaken by the management to gauge the viability of maintaining offices globally", said another executive.

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Image: Air India Dreamliner in the Santacruz hanger.
Photographs: Sahil Salvi

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The practice of running operations at offline stations continues at a time when Air India's losses have widened to around Rs 5,400 crore (Rs 54 billion) against the target of Rs 3,989 crore (Rs 39.89 billion) in the financial year ended March 31, 2014 primarily on account of high operational costs.

The state-owned air carrier cut net loss to Rs 5,100 crore (Rs 51 billion) at the end of 2012-13 and reported a net loss of Rs 7,100 crore (Rs 71 billion) in 2011-12.

The airline has also missed the target of Rs 1,040 crore (Rs 10.4 billion) for operational profit, expected to be Rs 770 crore (Rs 7.7 billion).

The second quarter of 2013-14 was the worst for the airline, when it missed its revenue target by Rs 700 crore because of lower passenger load and a local fare war.

The airline, however, has hit the revenue target for 2013-14 of Rs 19,300 crore (Rs 193 billion).

The government approved a massive bail-out package of Rs 30,000 crore (Rs 300 billion) for the airline in mid 2012 (running till 2020-21) and since then the carrier has been surviving on doled out equity.

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Image: Air India building in Mumbai.
Photographs: Rediff Archives
Tags: Air India

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Air India continues to register variable losses in 19 routes, six of which are international routes.

Of the 19 routes that do not meet variable costs, the domestic loss making routes include Mumbai-Kolkata and Delhi-Bengaluru; the international route includes Delhi-Sydney, Delhi-Milan.

To ensure sustainable operations, independent directors on the airline's board have now started monitoring closely the financial performance of the national carrier across routes on a regular basis.

The independent directors are looking at ways to make routes profitable by cutting costs and optimising resource utilization.

The airline has stopped flying on routes on which it was not meeting jet fuel costs in the last financial year by cutting costs, cancelling flights and changing the type of aircraft deployed.

Air India deployed a Boeing 787 Dreamliner on the Delhi-Tokyo route after which the airline started making money on flight.

The airline is now considering discontinuing some domestic services, which do not meet variable costs, as suggested by independent directors.


Image: People walk inside the business class section of Air India's Boeing 777-200 LR aircraft.
Photographs: Punit Paranjpe/Reuters

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