Air India looking at hiking fares to increase profitability

Ailing national carrier Air India (AI) has turned bullish with the induction of the new Boeing 787 Dreamliner and is now looking at hiking fares to increase profitability.

"We cannot afford to lose out anymore. We have to look at our profitability to stay afloat. If there is a need and demand, we will not hesitate to hike fares," Air India chairman and managing director Rohit Nandan told MAil Today on the sidelines of an event organised to induct the first Dreamliner here on Wednesday. "We will not hesitate to be the first to hike airfares sooner or later."

Another AI official said, "Till now, Jet Airways or other carriers were the first to hike fares. From now on, we are adopting a strategic shift in our functioning to generate more revenue. We cannot always be forced to keep fares low. It has to be demand-based. We cannot be seen ending up with our airline up for sale."

Since January, airlines have jacked up fares by over 40 per cent. Fares were hiked recently with major domestic carriers, including AI and Jet Airways, hiking fuel surcharge between Rs 150 and Rs 250 for domestic travel, and Rs 825 for one-way international ticket after aviation turbine fuel price was hiked by 7.6 per cent on August 31.

The Dreamliner is seen as becoming the mainstay of lossmaking AI's global operations and officials hope it will attract new customers. The carrier is aiming to stage a comeback and it hopes the Dreamliners will attract passengers and help increase its market share. The carrier will get 13 more Dreamliners by March 2013 followed by another 14 in 2016. "We hope the Dreamliner will take Air India back to the good, old Maharaja days," civil aviation minister Ajit Singh said at the event.

The national carrier, which once dominated the aviation market, has seen its share shrink to a mere 18 per cent and is now ranked at the fourth spot. It has lost out to fierce competition from private, full-service and low-cost carriers. AI will initially fly these state-ofthe-art aircraft to six or seven cities and then shift them to international routes during winter. The carrier has also set up a committee headed by Nandan to look into its requirement for planes.

The airline is desperately working on reconfiguring seats of its planes that fly on domestic routes to accommodate more passengers and increase revenue.

"We have reconfigured five of our narrow-bodied Airbus 320s which will increase the total number of seats from 145 to 168 with the more spacious business class seats being converted into economy class," Nandan said.

The airline has also decided to lease all its aircraft, including the 27 Dreamliners, to lessors. "This will bring down our financial commitments. We have to work out on financial restructuring as per the turnaround plan," Nandan added.

The government has refused to provide more funds to the carrier, which has accumulated debt of Rs 46,500 cr. The airline has already received Rs 2,900 crore out of the Rs 4,000 crore allocated for its revival in this year's Union Budget.

Courtesy: Mail Today