Air India aims to cut losses by 75%

National Aviation Company Ltd, which runs Air India, aims to reduce losses by 75 per cent by the end of 2011-12.

"We will cut our losses by 75 per cent by the end of 2011-12. We will be able to achieve this because we have registered an increase in the number of passengers and also revenue," said Nacil chairman and managing director, Arvind Jadhav.

"Our losses during the last financial year were of Rs 5,400 crore (Rs 54 billion), which will be cut down by 75 per cent by 2011-12."

The airline had made a three-year turnaround plan in 2009-10.

Air India, with an accumulated loss of over Rs 10,000 crore (Rs 100 billion), continues to make operational losses. The airline recently hired an expat chief operating officer, who has vowed to go ahead with the airline's cost cutting plan.

But it is felt that it is difficult to cut cost in the airline. According to 2009 estimates, two major expenditure verticals were fuel cost (34.2 per cent) and staff cost (16.2 per cent).

The fuel cost is huge due to heavy taxes. And there is a limit to savings on this account. Staff cost can't be brought down as the company management has decided not to go ahead with staff cut.

The other cost verticals of the airline are interest for loans (8.1 per cent), depreciation cost (6.3 per cent), hiring of aircraft (7.4 per cent).

Interest on loans can be brought down a bit with restructuring of debt, but depreciation cost will further increase with the induction of new aircraft.

Air India, which plans to make Terminal 3 as its hub, sees an increase in passenger number by around six per cent when Delhi airport becomes its hub.

"With Delhi airport becoming our hub, we see our passenger numbers increasing immediately by around six per cent and by around 16 per cent later," Jadhav said before Terminal 3 started commercial operations with the arrival of an Air India flight from New York.