'Air India to focus on higher revenues'

Seeking a turnaround in its fortunes, Air India is looking to augment revenues rather than trim staff expenses even as it battles tough market conditions and financial woes.

The national carrier, which is surviving on a staggered Rs 30,000 crore bailout package, has 19,000 employees, including over 1,500 pilots and about 6,000 people on contract.

A senior official said the airline is looking at various options to increase revenues and that there are no plans to cut down costs related to staff.

“Air India’s staff is around 12% of the total expenses. It might be an easy way to slash expenditure by withdrawing or doing away with certain perks given to employees but that will not help in the long-term,” he noted.

The Government-owned airline’s annual wage bill stood at Rs 3,100 crore in the 2014-15 fiscal as against Rs 3,600 crore in FY 2011-12 by abolishing productivity-linked incentives as per the Department of Public Enterprises (DPE) guidelines.

Significantly, the carrier had early last year announced a slew of cost-cutting measures including reduction in reimbursables by 10% and abolition of posts from non-operational areas besides other measures to rein in the spending and return to break-even.

The use of expensive hotels or five-star hotels for stay during travel or holding events has been restricted unless it is unavoidable and the budget for such activities has been reduced by 10% as part of the measures. These cost-cutting measures are part of a two-pronged drive to speed up our return to the break-even status,” Air India had said.

The sale and lease back of aircraft would be a good option that would help in better revenue management. Besides, the focus is on flying more number of people, introducing new routes, improving efficiency and services, the official said.

Sale-leaseback is an arrangement in which an owner sells an asset to a leasing firm and, at the same time, leases it (as a lessee) on a long-term basis to retain exclusive possession and use.

This frees capital tied up in a fixed asset, while the lender obtains a guaranteed lease.

Currently all its 21 dreamliner Boeing 787-800 planes in its fleet are operating under the sale and lease back arrangement.