Lok Sabha Question No. 960 (UNSTARRED), answered on 2015-07-27
Subject: Review of Turnaround Plan of Air India
Ministry: CIVIL AVIATION
Asked by: RAGHAV LAKHANPAL, GEETHA KOTHAPALLI

## GOVERNMENT OF INDIA MINISTRY OF CIVIL AVIATION LOK SABHA

UNSTARRED QUESTION NO. : 960

(To be answered on the 27 th  July 2015)

## REVIEW OF TURNAROUND PLAN OF AIR INDIA

960.

SHRI RAGHAV LAKHANPAL

## SHRIMATI KOTHAPALLI GEETHA

Will the Minister of CIVIL AVIATION

be pleased to state:-

- (a) whether the Government has reviewed the turnaround plan of Air India and if so, the details thereof along with the details of consolidated net losses of Air India for 2014-2015;
- (b) whether the Government has not been able to reduce the losses despite substantial savings in the fuel bill and if so,the reasons therefor;
- (c)  whether  the  revenue  of  Air  India  was  lower  despite  increasing passenger feed from Star Alliance partner airlines;
- (d) if so, the reasons for increase in engineering and maintenance costs;
- and
- (e) whether this a case of mismanagement of funds due to which on one side revenue has decreased but maintenance costs have increased and if
- so, the corrective measures taken in this regard?

## ANSWER

Minister of State in the Ministry of CIVIL AVIATION

(Dr Mahesh Sharma)

- (a) : The Turn Around Plan (TAP)/ Financial Restructuring Plan (FRP) approved by Cabinet Committee of Economic Affairs (CCEA) for Air India (AI) provided that equity would be infused by the Government subject to achievement of certain laid down milestones.  In compliance with TAP/ FRP, an Oversight Committee has been set up under the Chairmanship of Secretary, Ministry of Civil Aviation with Expenditure

Secretary, Additional Secretary and Financial Adviser, Ministry of Civil Aviation, Joint Secretary of Ministry of Civil Aviation and SBI Caps as members, to monitor the Operational and Financial Performance of Air India vis-a-vis the milestones set under TAP/ FRP. Meetings of the Oversight  Committee are held every three  months.  So  far,  eleven

meetings  of  Oversight  Committee  have  been  held. Some of the milestones laid down under TAP/FRP relate to improvement in On Time Performance (OTP), Passenger Load Factor (PLF), Yield (RS/PKM), Fleet Utilization, abolition of Productivity Linked Incentive, monetization of assets, hiving off of the Ground handling activity, Maintenance/repair activity of Air India into two independent subsidiary companies. The Company has achieved the Targets set out in the TAP milestones, and has made substantial progress in both Operational as well as Financial Areas. The main areas in which the company has registered improvements in FY 2014-15 in comparison to FY 2011-12 when the TAP was initiated are Annexed. (b) : No, Madam. Since the implementation of TAP/FRP, the Operating loss has reduced from Rs.5138.69 crores in 2011-12 to Rs.2171.40 crores in 2014-15, and Net Loss has reduced from Rs.7559.74 crores in 2011-12 to Rs.5547.40 crores in 2014-15. (c) : No, Madam. The Passenger Revenue as well as the Total Revenue has been consistently increasing over the past few years.The  Total Revenue has increased to Rs. 19718 crores during 2014-15 as against Rs.14713.81 crores in 2011-12..The additional feed from Star Alliance partner members has also helped the company in this direction. (d) : There has been a normal increase in the Aircraft Maintenance Costs over the past few years. The Aircraft Maintenance Costs has increased from Rs.830.81 crores in 2012-13 to Rs.1445.00 crores in 2014-15. The increase in Maintenance Cost is due to the fact that though the company is in the process of induction of new aircraft, however, there are a number of old vintage aircraft with the company which require regular maintenance to keep them in flying condition. However, this increase in aircraft maintenance expenditure needs to be seen in the context of the increase in the scale of operations of the company in terms of Average Seat Kilometers (ASKMs) over the similar period which have gone up by almost 30%. (e)  :  No,  Madam.    There  has  been  consistent  improvement  in  the Passenger Revenue and Total Revenue being posted by the company.

Further, there has been only a normal increase in aircraft maintenance expenditure which is essential to keep the aircraft in airworthy flying condition. The  Company  has  also  achieved  the  Targets  set  out  in  the  TAP Milestones. In fact, there has been an overall improvement in both Operational and Financial Performance of the company due to which there is a gradual decline in the Operating Losses as well as Net Losses of the company over the past few years. The same has resulted in Air India turning EBITDA positive in 2012-13.

- *****

## 1. Improvemerrt in Operati.onal  Performance

- i. The P:r.ssenger  Load Factor has improved'to 73.1% in 2014-15 frr:m th,e Seat Fact,rr of 67 .9Yo in 201 t'12'
- ii. The N$twork Yield achieved is Rs 4.35/RPKM in 2014-15  as against Rs 3.74/RPKM in 20ll-12'
- iii. The number of'Rcv,enue Pax has increased from 13.40 Million in 2011-1'.Zto  16.90 Ivlillion in 2Ol4-15'
4. iV. The cornpany has shown considerable  improvement  in the On Time Perfonorance  (oTP). The overall Network oTP achieved during 2014-15  is72.7% as against 67  '6%in20ll-12'

## 2. Improvements in Finarrciial  Performance

- i.  The op,erating  l-oss has consistently  reduced since merger and in 2{114-15  the same stands at Rs 2171.40  crores as compared  to Rs.5138.69  crores in 2011-12'
- ii.  The Net Loss durin  9,2014-15  is Rs.55 47.40 crores as against loss of Rs.7559.74  crores in,201 l-12.
- iii. The company has tumed EBIDTA  positive  by Rs 541'60 crores as against the negatiYe  EBIDTA of fu 2236 .95 crores in 20 10- 1 1  '
- iv. Total  Revenue inoreased by Rs.4026.31 crores i.e. 33.25% x compared  to levels  ,of  2011-12. The Total Revenue during 20L4'15 is Rs.19718  crore$  as against  Rs.14713.81  crores in 2011-12'

*:f **:t

## Annexure