By: Sharmistha Mukherjee
Despite the steep fall in crude prices, Air India is unlikely to meet its Ebitda (earnings before interest, tax, depreciation and amortisation) target of Rs 1,150 crore for the current financial year.
The airline has registered a shortfall of around Rs 1,500 crore in operating revenues for the nine months ended December 31, 2015. Operational expenses have, at the same time, soared to Rs 16,700 crore leaving the airline with an operational loss of around Rs 1,700 crore.
A senior executive in the airline said on condition of anonymity, “Despite the fall in fuel prices, financials are not looking good. The airline has recorded net loss of around Rs 3,600 crore for the first three quarters of the current financial year. It is unlikely that the Ebitda target can be achieved for the full year.” Air India’s total revenues till December stood at around Rs 16,000 crore, while total expenditure was well over Rs 19,000 crore.
After a long spell of losses, the national airline had returned to profitability in December 2014 with a net profit of Rs 14.6 crore in the month as against a loss of Rs 168.7 crore in December 2013, driven by a healthy growth in both passenger and cargo revenue. In January too, the airline’s revenues from passenger traffic operations improved by 8.4 per cent to Rs 1,500 crore, as against Rs 1,384 crore registered in the year-ago period.
The airline’s plans to monetise real estate assets too have failed to bring in any substantial gains. The airline had a three-year plan to monetise assets worth Rs 5,000 crore by March 2016 — to earn Rs 1,200 crore in FY14, Rs 2,000 crore in FY15 and Rs 1,800 crore in FY16. The decision was to use this money to retire its debt.
However, adverse market conditions and legal issues over title deeds and ownership clauses forced the airline to sign a memorandum of understanding with National Buildings Construction Corporation (NBCC) in December last year. NBCC will develop and redevelop properties on land owned by Air India on a project-to-project basis. The national carrier is now expecting to monetise assets to the tune of
Rs 5,000 crore over a 10-year period through its collaboration with NBCC. This delay is asset monetisation programme has adversely impacted the airline’s plan to clear debt of Rs 40,000 crore on its books. The airline’s annual interest outgo stands at around Rs 3,800 crore. “Of its annual revenues of around Rs 19,000 crore, Rs 4,000 crore goes towards repayment of loans and another Rs 3,800 crore in interest payments. That is 40 per cent of the airline’s revenues. If AI is to get out of this trap, it has to quickly monetise its assets”, said a senior official in the civil aviation ministry.
Air India had cumulative losses of Rs 36,000 crore on its books till last fiscal. The airline’s losses widened to Rs 5,388 crore in 2013-14, against the target of Rs 3,989 crore, primarily on high operational costs. The airline also missed the target of Rs 1,040 crore for operational profit. It stood at Rs 771 crore for FY14.