With Cost of Interest on the Debt, Air India Can Never be in Profit: Suresh Prabhu
The loss-making Air India is estimated to have a debt burden of over Rs 48,000 crore and the government’s efforts to turn it around have not achieved anything so far. Even an attempt for strategic disinvestment of the Air India failed miserably in May last year. Air India has been making losses since the merger with Indian Airlines in 2007.
Air India’s contemporary – Jet Airways – is struggling with its finances, its planes, capacity and operations have reduced considerably. As a result, Jet Airways’ loss becomes Air India’s gain. The gain, though, being miniscule by Air India standards.
65 per cent of Air India’s earnings come from international operations. Air India’s current fleet size of around 122 aircraft caused its passenger count to rise by nearly 4 per cent in the December 2018 quarter. Its revenue from passengers increased by 20 per cent due to more aircraft utilisation. The passenger revenue increased from Rs 4,615 crore in third quarter of 2017-18 to Rs 5,538 crore in third quarter of 2018-19. The number of passengers has increased to 55.27 lakh during the quarter from 53.28 lakh in the year-ago period – an increase of around 4 per cent. In the third quarter, total 15 new flights were started by Air India as disclosed by its management.
The civil aviation minister Suresh Prabhu described Air India’s woes during a livestream held on ‘Flying for All: Global Aviation Summit 2019’ a couple of days ago. The minister viewed the Air India situation as : “If you feel that future revenues can actually service the debt, it is not possible for the simple reason that the debt is so massive. The cost of interest on the debt, when you try to service it from your revenues, Air India can never be in profit. The future revenues of the company cannot service its “massive” debt and this legacy issue has to be segregated from the current challenges of Air India.” Therefore, we have to address the debt issue. We are proactively working with the Ministry of Finance to make it happen,” Prabhu added.
“We have prepared a plan… we are trying to professionalise the entire management of Air India, right from the CEO (chief executive officer) downwards so that there will be a proper management structure so that Air India can reach to newer heights,” he said.
“But anybody, who comes in, will ask this question ‘how do I deal with the legacy’. The same question I had to address when I took over as a minister. The same question, Air India’s new managing director or the new CEO or new board of directors would have to address – how do I deal with the past?” he added.