The state-run Air India Ltd is increasingly beginning to resemble private carriers as it adapts to market realities.

The flag carrier has grounded some 20 old planes that are fuel guzzlers and reconfigured 14 planes to have only economy class seats.

It is also in the process of selling and leasing back Boeing 787 planes, the Dreamliners, to avoid debt on its books and make a small profit, two Air India executives said.

The country’s oldest airline is slated to take delivery of its first three out of 27 Dreamliners in August. It has a debt of nearly Rs. 44,000 crore.

The airline is also looking to sell five widebody Boeing 777 planes it used to fly abroad, having discontinued several loss-making routes while a section of its pilots were on a 58-day strike as per a report in Mint by P. R. Sanjai.

"After a year-and-a-half, we have now achieved stability of schedules and, hence, improved our on-time performance. We would have actually made some cash profit if there was not any strike," said one of the two Air India executives mentioned above. "Despite the pilot strike, our passenger revenues for the June quarter was up at Rs.2,945 crore," against Rs.2,500 crore a year earlier.

The pilots' protest, which ended on 3 July, resulted in a revenue loss of nearly Rs.600 crore to the carrier.

Air India had a cash loss of Rs.37 crore in the June quarter, according to the executives, but this was much smaller than the cash loss of Rs.503 crore it had a year earlier as per a report in Livemint by P.R. Sanjai.

Experts, however, do not see this as sustainable as the airline heads into a typically lean season in the second quarter of a fiscal year and may have to offer concessions to win back passengers.

The executive said the airline is slated to sign special and long-term travel agreements with 700 Indian companies and is reworking its pricing strategies.

"We would not be dropping prices to woo travellers back on board but certainly we would be incentivizing our travellers with special offers and schemes," he said. "We are re-introducing non-stop flights to the US starting 15 August and will make Mumbai-London a daily flight from three times a week. We are on a revival mode."

The executive said cash margins improved after the carrier discontinued some non-profitable routes.

"In June, Air India has made cash margins (passenger revenue minus pure operating cost) of Rs.17 crore on international routes and Rs.75 crore on domestic routes," he said. "We have grounded 20-odd old planes, including Boeing 737, Airbus 310s and Airbus 320s. Also, we have reconfigured 14 of Airbus' 320 planes into all-economy cabins to accommodate more seats without adding more planes."

An airline consultant, also requesting anonymity, said Air India cannot keep reducing cash losses as it is offering 10-30% cheaper fares on international routes from mid-August. "Though Air India is not dropping prices across the board, it is offering stimulating prices competing with international biggies.... It needs to ruthlessly cut costs and maintain network integrity," he said, while noting that most private airlines reported profits for the June quarter, barring the troubled Kingfisher Airlines Ltd.

Privately run Jet Airways (India) Ltd, the country’s largest airline by passengers carried, has also cancelled several domestic and international routes to cut losses, is reconfiguring its aircraft to add more seats, and has sold and leased back two planes. It has plans to sell and lease back 15 more planes in this fiscal.

Jet Airways posted a Rs.24.7 crore profit in the quarter ended June against a loss of Rs.23.16 crore a year earlier, performing better than expected as Kingfisher Airlines cut flights and fares rose, helping Jet end a run of five loss-making quarters. India’s second largest low-fare carrier, SpiceJet Ltd, posted a profit of Rs.56.15 crore compared with a loss of Rs.71.96 crore a year ago, riding largely on income from the sale and lease-back of its planes.

Cash-strapped Kingfisher Airlines, though, reported a net loss that widened nearly two-and-a-half times to Rs.650.78 crore for the quarter.

Air India is set to make an operational profit this fiscal as per its turnaround plan, the second Air India executive quoted above said. Experts don’t see that happening too soon.

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