Costlier jet fuel eats into Air-India's profits

Carrier's total revenue in 2005-06 up around 18 per cent.

Rising fuel prices have taken their toll on Air-India's bottomline in 2005-06. After recording a net profit of Rs 96.36 crore in 2004-05, the company has just managed to stay in the black in 2005-06, though total revenue during the period went up around 18 per cent to Rs 9,000 crore from Rs 7,630 crore.

Attributing the fall in profits to the increase in international fuel prices, Air-India Chairman and Managing Director Vasudevan Thulasidas told Business Standard: "Although the accounts for the year ended March 2006 were yet to be finalised, indications are that the company would manage to stay in the black."

According to Thulasidas, the national carrier had to bear fuel cost of nearly Rs 3,000 crore in 2005-06 and one-third of this "" Rs 1000 crore "" could have been avoided had there been no rise in fuel prices. In comparison, the additional cost on fuel in 2004-05 was Rs 600 crore.

The price of aviation turbine fuel, which was averaging 114 cents per gallon in 2003-04, is now around 201 cents per gallon.

The airline may also end up with a higher wage bill of nearly Rs 890 crore in 2005-06, compared with the previous year's Rs 843 crore. The wage bill generally constitutes 15 per cent of the operating cost of the airline.

Faced with a rising fuel cost and wage bill, Thulasidas has chalked out a three-pronged plan to improve the profitability of the company. These include improvement in productivity, introduction of better products and forging new partnerships.

For productivity improvement, Thulasidas has appointed a six-member committee to review the existing productivity-linked incentive (PLI) scheme, which was introduced 10 years ago.

"The members of the committee include three Air-India directors and three experts. They are, a professor from the Indian Institute of Management-Ahmedabad, a member of the National Productivity Council and one from the National Institute of Industrial Engineering. The committee will submit its report in three months," he said.

Based on the recommendations of the committee, Air-India would recognise the productivity parameters of its 15,500 employees. The remuneration of employees would include salary with allowances and PLI.

The airline targets to achieve load factor of at least 75 per cent by introducing a combination of new schemes and better services. Thulasidas is confident of striking an alliance with a new partner by the end of the year.

"All these efforts will, hopefully, help us to be one of the best five airlines in Asia by 2010," he concluded.