Tata-owned Air India incurred losses amounting to around Rs 7,000 crore in FY23 due to impairments related to faulty aircraft and engines, as well as the low-cost airline AirAsia India. However, executives noted that the losses have decreased, and the carrier achieved positive EBITDAR (earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs) at the operational level.
A media report while citing an individual familiar with the situation stated that Air India and its subsidiary Air India Express achieved positive EBITDAR and came close to breaking even after covering lease rentals in the initial year in FY23. The individual estimated that the net loss amounted to slightly over Rs 2,500 crore, a decrease compared to the Rs 9,556 crore loss in FY22.
Air India bore a significant portion of the write-off related to AirAsia India, while the remaining amount was absorbed by AirAsia, its former joint venture partner.
Despite the write-offs, Air India’s financial situation in the fiscal year ending in March was deemed healthy by executives due to the management’s focus on operational efficiency and cost reduction. Impairment costs totalling over Rs 1,500 crore were attributed to AirAsia India, while around Rs 5,000 crore stemmed from Air India’s old planes and engines.
The Tata Group assumed control of Air India in January 2022 after its privatisation. The group is presently in the process of consolidating its aviation units, with Air India Express merging with AirAsia India and Vistara merging with Air India.
An official commented that the airline required substantial restructuring, and the magnitude of the losses indicates that the plan is yielding results.
Officials clarified that a positive EBITDAR indicates profitability at the operational level, excluding expenses like taxes, rent, and restructuring costs, the media report added.
Top executives emphasised that the airline maintains a steadfast focus on both cost reduction and safety, considering both factors to be of paramount importance.
The executive mentioned in the report stated that there are plans to auction off or scrap numerous aircraft, prioritising safety. They emphasised Air India’s dedication to modernising aircraft and systems while maintaining a strong focus on safety, even as cost reduction is achieved through technology-driven modernisation. The airline currently faces the challenge of lease rentals for several grounded aircraft that do not generate revenue. To address this, a budget of USD 400 million has been allocated for the revitalisation and refurbishment of old aircraft.
On a standalone basis, the airline reported a net loss of Rs 9,556.5 crore and net revenue of Rs 19,815.9 crore in FY22. In FY21, it recorded a net loss of Rs 7,017.4 crore with revenue of Rs 12,104 crore.
Tata Sons has implemented various measures to enhance revenue generation and reduce costs.
Campbell Wilson, CEO of Air India, who has been tasked with transforming the airline is establishing a new operational structure. The airline is working on improving systems and processes to ensure on-ground efficiency while closely monitoring daily losses. Wilson’s objective is to cultivate a customer-centric and service-oriented culture.
There has been a gradual improvement in operational yield, particularly on international routes, with increased activity in both domestic and global travel. An executive disclosed that the airline has seen a 25 per cent improvement in unit revenue while increasing passenger load by 5 per cent.