Seeks SBI Capital Markets’ help as net loss for FY15 estimated at Rs 5,400 crore (Rs 54 billion)
The Union civil aviation ministry has asked SBI Capital Markets to review the turnaround plan of government-owned Air India, with the changes in the operating environment and the airline’s inability to reduce loss.
For 2014-15, the airline is expected to see a consolidated net loss of Rs 5,400 crore (Rs 54 billion), 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.
The airline’s accounts are yet to be audited and the profit and loss figures are provisional.
AI is also facing increasing competition from both no-frills and full-service airlines on the domestic and international routes.
The turnaround plan approved in 2012 also did not contemplate the Jet-Etihad alliance and proposed relaxation of the government's norms on international flying, two factors which will impact AI growth.
Also, the plan needs a review with the fluctuations in currency rates and fuel prices, an AI executive said.
By the provisional numbers, while capacity deployed and passenger revenue grew nine per cent to Rs 15,450 crore (Rs 154.5 billion), this was about Rs 500 crore (Rs 5 billion) lower than the expectation.
The revenue was lower despite increasing passenger feed from Star Alliance partner airlines.
Total revenue, including income from charters, cargo and Haj flights, is pegged at Rs 19,500 crore (Rs 195 billion).
The airline spent Rs 8,400 crore (Rs 84 billion) on fuel as against an initial budget estimate of Rs 9,600 crore (Rs 96 billion).
The daily spending on this has reduced to about Rs 18 crore (Rs 180 million) from Rs 27 crore (Rs 270 million) earlier, due to lower jet fuel prices.
As a result, the carrier generated a surplus of Rs 2,600 crore (Rs 26 billion) over variable costs in FY15, up from Rs 1,107 crore (Rs 11.07 billion) in the previous year.
About 80 per cent of its operations meet the variable costs.
However, these costs do not include interest and depreciation charges, still high.
Despite financial restructuring, the interest bill has remained unchanged at around Rs 4,000 crore (Rs 40 billion), because of bridge loans for acquisition of Boeing 787s, interest payment to oil companies and borrowings to meet shortfall in the government's equity infusion.
For FY16, AI is targeting earnings before interest, tax depreciation and amortisation of Rs 2,000 crore (Rs 20 billion), 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.
