Air India mulling to import jet fuel directly

Air India is mulling direct import of jet fuel as costs have soared by about 40 per cent in the 11 months of the current financial year, denting the revenues of the debt-ridden carrier by Rs 2,000 crore.

The airline is examining the idea of direct import of air turbine fuel as recently permitted by the government, to save the fuel costs, a senior Air India official said. He said that increase in fuel costs has had a fall out on Air India's revenues as the air turbine fuel prices have increased by 20 per cent in February alone.

This will dent our revenues by Rs 2,000 crore, he said, adding that "on a cumulative basis, from April 2011 to February 2012, its fuel cost has gone up by 40 per cent. If it was not for the fuel price we would have done far better."

On February 2, the state-owned oil marketing companies had stopped supply of the jet fuel to Air India, as the airline had failed to honour payments even after 90-day credit period.

The matter was resolved after a high-level intervention by the officials from the ministries of Civil Aviation and Oil, in which the airline agreed to pay part of the money within 48 hours.

The beleaguered national carrier's financial restructuring plan of Rs 18,000 crore was agreed in-principle by the banks last month. Official figures show the debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore is long-term loan on fleet acquisition, Rs 4,600 crore is vendor dues besides an accumulated loss of Rs 20,320 crore.

Recently, the airline was given a go ahead by the Cabinet to raise Rs 7,400 crore through bonds. Besides the government is also looking at infusing additional equity of about Rs 6,600 crore in Air India.

The carrier has also taken various cost rationalisation measures, including phasing out of its Airbus 310 aircraft, reduction in the deployment of Boeing 747s, return of its leased aircraft and grounding of its aging fleet for disposal.

Besides, it has also managed to refinance some of the high cost loans with lower interest rates, as well as reduction of contractual employment. "We have reduced the number of our former employees hired, who had been on contract. This has reduced our costs," the official said.

The debt-stricken airline, though, has something to cheer about as it registered improvement in year-on-year performance in February, with average passenger revenue growing by a healthy 32 per cent, the official said.

The airline is also set to implement its new international schedule from March 25 by increasing frequencies on the Delhi-Tokyo-Delhi route from four flights to five flights per week.

The frequency on the Delhi-Dammam-Delhi route will be increased from two flights per week to daily flights, while the Delhi-Bahrain-Delhi route would have daily connectivity.

Also, daily flights will be introduced on the Dubai-Vizag route, he said. On the domestic network, the airline will increase its frequency on the Mumbai-Kochi-Mumbai to two flights daily and also introduce a new Hyderabad-Kolkata-Hyderabad flight.

Meanwhile, Boeing will shortly showcase the airline's Dreamliner Boeing 787 aircraft painted in Air India's colors and internal livery at the Hyderabad Air Show 2012 between March 14 and 18 March. The Boeing Dreamliner is expected to be cornerstone of Air India's turnaround due to its fuel efficiencies.