Air India Express turns profitable for the first time

NEW DELHI: Air India is likely to enjoy acche din, as its low-cost international subsidiary Air India Express has turned the corner by reporting net profits for the first time since it started operations in April 2005.

The airline reported a profit of Rs 362 crore during the 2015-16 fiscal, helped by lower fuel prices and improved revenues over the past year on the back of flying more people per flight. The airline had incurred losses of Rs 62 crore during the 2014-15 fiscal.

Profits of AI express has come during the fiscal, when its parent Air India is also expected to make operational profit. The airline also found a mention in Prime Minister Narendra Modi’s Independence Day speech, where he complimented the national carrier for improved financial performance.

The airline's board approved the audited financial results on Wednesday. K Shyam Sundar, chief executive officer of Air India Charters Ltd, the subsidiary that operates Air India Express, told ET that the turnaround could be achieved on the back of improved operations.




“This turnaround should be attributed to the sustained efforts of all the Air India Express employees and the tremendous trust placed on us by our valued passengers. In purely business terms, the positive net outcome may be attributed to record levels of aircraft utilisation, PLF (Passenger Load Factors) and yields achieved in the year. Of course, low ATF rates also helped,” Sundar to ET.

Analysts said a government company turning profitable is laudable. “When a private sector company turns profitable in today’s time, you compliment it once. But when a government company takes advantage of the situation and turns profitable, it has to be doubly lauded. I say that because any government company has its own systemic disadvantages, which a private company will never have,” said Jitendra Bhargava, former executive director of Air India. He said that the moment a company turns profitable from a long period of loss, the company started thinking positive and ‘that will be the biggest achievement of these improved numbers’.

The financial results show that the airline’s biggest benefit came from reduced oil prices that led to a 28.6% reduction in fuel during the FY16 fiscal from FY15. The overall reduction in cost was to the tune of 4.7%. The low-cost carrier, which operates a large part of its flights on the Gulf routes, also saw 11.3% increase in revenues.

The increase in revenues came by flying more people per flight and all so utilising its aircraft more to operate more flight with the same fleet. An airline official, who did not wish to be identified, said that the airline has registered such huge profits after paying about Rs 240 crore as revenue share to its parent Air India. According to the agreement between the two, AI Express has to share about 11% of its revenues with Air India for using its brand name.

“The major addition to the revenues came from earnings of Rs 56 crore from ancillary revenues, which were almost zero in FY15. We earned Rs 46 crore from excess baggage charges and Rs 10 crore from advance seat selection charges,” said the official, who requested anonymity.