State-run Air India, which posted ₹8-crore operational profit in FY16, the first in a decade, now expects to increase it to about ₹700 -800 crore in a couple of years.
Its Chairman and Managing Director, Ashwani Lohani, told BusinessLine that the airline also plans to induct over 100 aircraft over the next four years through the lease route abandoning its practice of purchasing them outright.
“The increase in profits should help us reduce our debt burden every year,” Lohani, who took over as CMD in August last year, said. He said the increase in the fleet size will lead to higher revenues and probably better profits over the next few years which will lead to reduction in debt.
At present, Air India has a total debt of about ₹50,000 crore and its servicing requires about ₹4,000 crore a year. “The turnaround has just began. We are just at the margins right now. Lots need to be done,” the 57-year-old bureaucrat said.
Air India has traditionally bought most of its aircraft and this is perhaps the first time it will be taking on lease such a large number of aircraft. Lohani, an officer of the Indian Railways Service of Mechanical Engineers, admitted that the leasing cost will be a burden on the airline. But leasing will lead to two major advantages: it will be able to induct them quickly scuttling the entire process of getting clearances as well as guarantees needed to buy aircraft and thereby capitalise on the rapidly growing market in the country.
With a larger fleet, the airline will also be able to expand its operations and increase its revenues faster.
At present, Air India has 132 aircraft and of them a few will be phased out. It plans to induct 14 wide-bodied, 16 Boeing 737s, 35 ATRs and the rest A320s before 2020. The configuration could change depending on the phase-out programme.
Coming down heavily on the merger of Air India with Indian Airlines, Lohani said it has left the airline with a combined debt burden of ₹50,000 crore which is going to be difficult to shake off. “The primary objective of any merger should be synergy but it didn’t achieve that,” he said. Lohani, known in the bureaucratic circles as a turnaround specialist, said the merger created more problems for the airline. After the merger, the engineering and the ground handling divisions were de-merged.