Trimming losses, NACIL to shift lean Gulf routes to AI Express

Sat, Nov 7 06:47 AM

Loss-making state-owned carrier National Aviation Company of India Limited (NACIL) is planning to shift unprofitable Gulf routes operated by erstwhile Indian Airlines and Air India to international low-cost carrier Air India Express. The move — part of the company's route rationalisation efforts under its turnaround plan — is expected to result in annual savings of around Rs 113 crore per annum.

In an internal observation, the civil aviation ministry has said that Air India, Indian Airlines and Air India Express were competing not only with other airlines, but also with each other, causing "sub-optimal routes and lower revenues for both brands" on these routes.

The route rationalisation plan, along with other measures taken by the carrier to shore up its revenues and undertake cost-cutting, will come up for review in the next meeting of group of ministers (GoM) on November 12.

After the proposed rationalisation takes effect, the total weekly seating capacity for Air India and Indian Airlines will come down to 13,820 from current levels of 20,301. At the same time, the all-economy weekly seating capacity on Air India Express will increase from 19,702 to 28,503. The move is expected to translate into savings of Rs 47 crore on account of the low-cost model, which is expected to yield better volumes.

Most of the these routes have been incurring losses in the April-august 2009 period. For instance, the Mumbai-Sharjah route, with a 46 per cent load factor, incurred losses of Rs 9 crore — the highest among the Gulf routes. At the same time, flights operated by Air India Express to west Asian destinations, like Dubai and Sharjah, have been profitable with high load factors.

Air India has been struggling to come out of the red — having incurred losses to the tune of Rs 7,200 crore till now — and had knocked on the government's door for a bailout. The finance ministry has given its assurance of providing around Rs 5,000 crore, but not before the carrier undertakes some drastic measures to cut costs.

Inside News

Editor's picks