The airline is aiming to open new routes internationally and especially regionally, so as to compete with new players and satisfy increasing demand in the sector, says Lohani.
Although Air India still has on-time performance issues and a massive debt, the chairman and managing director of the airline, Ashwani Lohani, talks to Biz@India about the positives of the airline, like increasing routes and connectivity, inducting more aircraft, and customer satisfaction, amongst others.
How do you view Air India’s performance under you?
In 2015-16, we posted an operational profit of about INR 1.05 billion (USD 16 million), after almost 10 years. In 2016-17, it is again going to be around INR 2 billion (USD 31 million). The airline is now looking at it on a year-to-year basis. We are getting a lot of positive mileage in the country, negative news reporting has almost stopped, passengers are happy, the staff is happy and we are expanding.
We are on a very aggressive expansion mode. In the year 2016, we launched four international flights, which is a very large number for any airline in the world. This year, we hope to launch seven international flights, which is massive.
We are launching three new flights to the United States of America (US) apart from the four we already have. The airline is now regarded as a force in India, everybody says it has improved and financially also we are doing well.
What are the major changes brought about in Air India by you?
Major changes in the last couple of months that you may have noticed are induction of new aircraft and new routes. The morale of the staff has improved, service levels have improved, and all this has resulted in a better financial performance.
The airline has opened many new routes in Europe, how are they performing?
Last year we opened a new route, Delhi (north India)-Vienna (Austria), then we opened Delhi- Madrid (Spain), and next there was another flight, Ahmedabad (in the western state of Gujarat, India)-London (United Kingdom). This year on August 15 we are starting another route to Stockholm (Sweden) and on September 15, the next one to Copenhagen (Denmark).
After this, nothing more in Europe, I think Europe will be taking rest for some while. But the flights are doing really well.
What are your plans for the next two-three years? Do you think the eastern part of India is less connected to Europe via Air India?
Yes, I agree. When I last went to Kolkata (in the eastern state of West Bengal) there were a lot of demands for connecting Dhaka (Bangladesh), Kolkata and London. That is in our mind. At the right time, with the right analysis and with the right equipment we may look at that.
How many destinations will Air India have within the next three years?
Within the next two-three years, we will be growing really aggressively in the domestic market – in the regional air space. We will increase our footprint in the regional sector and keep continuing to add on more international flights. From Tier II to Tier III, Tier I to Tier II cities, we will have more of shorter route flights.
What are the main growth areas that you are focusing on?
Right now we have approximately 70 domestic destinations and about 30-40 international destinations. Within the next three years, we should add at least 30-40 new destinations to our bouquet.
What are the other areas you are focussing on for overall improvement?
International traffic needs to improve. We start with the routes. We decided to go international and open a lot of new routes and then the infrastructure and all will fall in space. We have to look out for all those aspects. We are looking at every single aspect of airline right now.
Is the competition for Air India intensifying or getting easier?
Competition in domestic metro sector, especially in the prominent cities is tough and intensifying every day. But we don’t have much competition in the regional sector or in the international sector. As you say in prominent cities, competition is tough, how is Air India gearing itself to take the challenge? See, we really cannot combat it totally. Because, the private sector airlines, the way they operate is not how we operate. The rate at which they are inducting aircrafts, we, being a public sector airline legally cannot match that. What we will do however is that in the domestic sector we will focus on the regional sector and we will densify the main city routes.
To combat the private airlines, where do you put Air India’s service, in terms of giving food on board, etc.?
We have become as aggressive as the private sector airlines. On the pricing front also we are very aggressive. On the cost control, we are now very focussed. We are trying our level best to give our passengers the best value for money. We will also not go down below a standard. I think we are able to compete.
Do you have any plans to connect with initiatives like the Regional Connectivity Scheme (RCS)?
We are perhaps the biggest player in RCS, right now. We have 10 planes flying on the regional routes, and 10 more planes are expected in the next three months. Then it will become 20 planes and we look at this figure of 20 becoming 50 within the next two years.
What are your plans of looking at the north-eastern part of India?
In north-east India as well we are going to increase the number of flights. We are looking at getting more ATR type of aircrafts and trying to keep two ATR planes in Guwahati (Assam), which will fly to various north-eastern cities, and will also run as a shuttle service providing more connectivity to Delhi, and other places.
What would you like to say about Air India’s On-Time Performance (OTP)?
Our OTP is at 80 pc right now. We are lower than other carriers, but again there is a reason to that. First, we are a network carrier. We are not point-to-point carrier. Second, we are also an international carrier doing a lot of connecting flights. If an international flight is late and there are lot of connections, we tend to delay a lot of domestic flights also. It is not an apple-to-apple comparison. For the moment I think it is fairly decent keeping in mind our constraints.
But don’t you think that OTP is an important factor in performance of an airline?
Yes, it is. I think we are doing fairly well. It’s now 80 pc, maybe we can increase two pc or three pc and that is a very good OTP for us.
What is the revenue per available seat kilometre, up/down?
At the moment I can’t tell you the exact figure, but in the domestic sector the average ticket price is INR 5,000 (USD 78).
That may be your average ticket price, but what is Air India’s earning per ticket?
Earning is very marginal. In the airline business, the profit margins are extremely low, very low. Last year, we had a total turnover of INR 200 billion (USD 3 billion). But it was just about INR 1 billion (USD 15 million) profit, so you can understand what margin we are getting.
What actions are you taking regarding Air India’s debt situation?
That is massive. We are looking at all means of restructuring. Turning around an organisation on a year-to-year basis is our expertise. We have always done that. But it’s too difficult to handle debts that run into decades. The debt on our head is almost INR 500 billion (USD 7.5 billion).
What is the way out?
I really can’t say. If we are able to restructure, probably we can find a way out. Some debts can be converted into equities; some can become low interest debts. We are working on a lot of things. I do not really know if we can handle that but it’s too big an amount. But I will give it a shot.
Are you planning to add more aircraft to the line?
Yes, we are – 10 ATRs are coming now, 10 ATRs are coming within the next one year, another 10 will come after that, we are getting three more Boeing 777s in the next one year. In less than a year, we are getting four more Boeing 787 Dreamliners. We are getting 29 Airbus A320s, as well.
How are the Dreamliners performing?
The Dreamliners are performing really well. I am really happy with it. People are taking it with lot of appreciation. They feel good when they see a Dreamliner especially in the domestic routes. Performance wise also, now they have stabilised.
What are your initiatives to improve the services of the airline?
We have a very good institution called the Central Training Establishment (CTE) and we are trying to improve that as well. We are ultimately looking at converting that into a university sort of thing and making it more broad-based. Air India gives you the highest baggage allowance. While other carriers give 15 kg, we are the only ones who give 25 kg. We give you the best leg space – I think it is four or five inches more.
Air India has the maximum reach as we fly to almost 120 destinations. We are the cheapest airline and give free and quality food. Our flights are safe and pilots are experienced. We are going to improve all of these day-by-day.
As of now we are healthy and making more money than we spend, on a year-to-year basis. Air India has turned around on a year-to-year basis, if we were a debt free company, we would have done much better. But massive debt is an issue; we are taking all steps to do whatever is possible.
What are your expectations from events like the Paris Air Show?
Unfortunately, I would not able to come. But I would have loved to go there. If I would have gone there, I would have looked for aircraft of different ranges. If I want to do mid-long routes, I would have looked at 100-seaters aircraft. For Tier II to Tier II routes or Tier II to Tier III routes, I would have looked at 20-25-seaters. Different size of aircrafts can adapt themselves to the routes that we have. In all the routes if I put an ATR 42, it goes empty as I don’t have anything smaller. In a lot of routes ATR 72 takes more time. If I can get a jet that has about 200 seater capacity, that will do better. Options can be looked at in such ways.