Losing Altitude

The numbers for the current fiscal are also expected to be equally depressing. While the airline companies are hopeful of cutting losses, profitability is still some way off.

The bugbears

While high fuel costs is the major reason for their unenviable situation, domestic airlines are also hit by huge employee costs and low demand for seats. Plus, the SARS scare in South East Asia earlier this year has also contributed to the gloom. Air-India alone took a Rs 100-crore hit due to cancellations of flights to Hong Kong in the wake of the epidemic.

8220;Fuel is one of the major cost components of Indian Airlines and amounts to about 30 per cent of operating cost. The government should take steps to rationalise the various taxes on Aircraft Turbine Fuel ATF,8221; says Sunil Arora, chairman, Indian Airlines. Every percentage increase in ATF prices adds over Rs 15 crore per annum to the operating cost of Indian Airlines.

It8217;s not just ATF costs. Jet Airways, for example, is also burdened with expensive debt which it tried to reduce with the help of a private placement of shares. But the plan could not take off. With the government-appointed Naresh Chandra Panel recommending foreign direct investment FDI of up to 49 per cent in domestic aviation companies, there are chances that Jet will be able to offload a part of its shares to foreign airlines to raise funds.

Trouble-shooting

Jet Airways is putting in place a series of automation initiatives to increase productivity of manpower and bring in greater efficiency. The company expects its cost-pruning exercise to bring in savings of over 2 million each year. The company is looking at measures such as automated package reconciliation, a new internal communications system and new booking procedures via a global distribution network to help it achieve the same. According to Wolfgang Prock-Schauer, CEO, Jet Airways, some of these measures are already being implemented, but the results will only be visible at the beginning of the next fiscal. 8216;8216;The airline is aiming at a 40 per cent decrease in communication costs alone,8217;8217; said Prock-Schauer, on the sidelines of a press meet some months back.Being a government company, Indian Airlines does not have the same scope for manoeuvrability as Jet. And company officials say that all its efforts are aimed at reducing its fuel bills.

Future focus

The domestic air travel market expanded by 8 per cent in the first half of current fiscal. Airports Authority of India AAI data shows that 14.63 million passengers filed through terminals in April-September 2003 compared with 13.55 million during the same period last year. Arora feels that fiscal 2004 will be as good or even slightly better than 2000, the year before 9/11.

Jet also expects to improve its November-February load factor, though the number of passengers it carried dropped about two per cent in the April-September period inspite of massive rate cuts. The airline industry is also buoyed by the recommendations of the Naresh Chandra panel, which, among other things, has asked for privatisation and a significant cut in excise and other taxes on ATF. The panel has also asked the government to open up international routes to private airlines.

And these players are already making plans to fly abroad. Apart from starting 16 flights a week to Sri Lanka, Jet is also planning to start flights to Kuala Lumpur, Singapore and Bangkok. According to market buzz, Sahara is also expected to follow suit soon.Meanwhile, for Indian Airlines and Air-India, expansion is key. 8216;8216;We need to get more capacity, either through fleet expansion or acquisition, to cope with the increasing passenger traffic,8217;8217; says newly appointed chairman and managing director of Air-India, V Thulasidas.

8216;8216;Both Indian Airlines and Air-India have been spending a huge amount of time and money for identifying suitable aircraft types for its operations,8217;8217; says Paresh Nerurlkar, spokesperson of the Indian Commercial Pilots Association ICPA. But he adds that with every change in government or or and even top management, the evaluation studies are shelved and new parameters are drawn up, leading to considerable wastage of time. Nerurlkar warns that if India does not act now, we could soon have foreign airlines flying even on domestic routes.