Crude oil prices at around $60 per barrel are the “ideal” level for Air India to sustain its new-found revenue growth, the airline’s Chairman and Managing Director (CMD) Pradeep Singh Kharola said. When asked about the surge in crude oil prices and its impact on Air India’s revenue growth, Kharola told IANS: “I believe the airline is comfortable with oil prices being in the range of $60-65 per barrel.” “Anything beyond this range will obviously erode our bottom line,” he said at the company’s HQ — Airlines House — located here.
Several global factors like production curbs and high demand have led to a surge in crude oil prices to a three-year high. As of January 18, 2018, it hovered around the $70-a-barrel mark. Crude prices are important for airlines, as jet fuel, which is a refined product, is heavily taxed in India and forms a major cost component. The new CMD pointed out that on a year-on-year basis the airline has grown its revenues by around 10% during April-December 2017. He, however, did not disclose any figures.
Recently, Parliament was informed that Air India is expected to report a net loss of Rs 3,579 crore for 2017-18 as per “(budget estimates) (projected)” from a (provisional) net loss of Rs 3,643 crore for 2016-17. On the other hand, the airline is projected to increase its operating profit to Rs 531 crore (BE projected) for 2017-18 from a provisional operating profit of Rs 215 crore for 2016-17. The airline, which is under a massive debt burden of Rs 50,000 crore, had posted an operating profit of Rs 105 crore in 2015-1 and is expected to report an improved operating profit margin for the last fiscal.
According to Kharola, the airline plans to increase its revenue by focusing on the business class segment by providing better services in terms of food and beverages and entertainment options. In terms of new international services, Kharola said that the airline is expected to commence a New Delhi-Los Angeles flight within the next two-three months and increase frequencies to Australia. In regard to the ongoing discussion surrounding the divestment process, Kharola distanced himself and stated that his mandate is “to improve the airline’s efficiencies and to keep a tab on costs”.
However, he said, efforts are underway to safeguard employees’ interests. Air India has over 11,000 employees, whereas at the group level, including its subsidiaries, the number of staffers goes up to about 20,000. Currently, a ministerial panel is firming up the contours of the strategic divestment — of at least 51% stake — in Air India and its subsidiaries. Last month, consulting multinational EY had been appointed as transaction advisors to aid the government in the strategic divestment process.