Not even one in two Air India flights were on time this January

Not even one in two Air India flights took off on time in January from four of India’s busiest airports. The airline also had the lowest seat occupancy (number of occupied seats on an aircraft) during the month at just 78%. In other words, nearly every fourth seat was empty on an Air India aircraft. Air India reported the highest rate of passenger complaints among all scheduled airlines and its flight cancellation rate was at least four times that of market leader IndiGo during January.

Air India is the only state-owned airline in the country and has been faring poorly compared to its private peers. Now, as the Modi government tries to sell it off in the second attempt – a Preliminary Information Memorandum for the sale is already out – it is entirely possible that potential buyers would take Air India’s dismal operational parameters also into consideration before coming forward with a bid. The government is offering 100% stake in Air India along with a 100% stake in its international low cost arm Air India Express and 50% in ground handling joint venture AISATS in the fresh round of disinvestment.

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Taking a lesson from the debacle during the first attempt at selling off this loss making airline, not only has the government offered to exit the business of flying this time (it had offered only 76% stake during the first attempt at selloff), it has also taken off at least half the debt on the books of the airline and suggested some more concessions to lure in bidders. During the first attempt at sale, not a single bid had been received.

But what about the falling operational parameters at what was once considered India’s premier airline? Mounting losses, concerns over workforce and legacy issues are already deterrents in the sale of Air India.

AI’s service quality, operational parameters declining

Latest data from aviation regulator DGCA show how Air India’s service quality and other operational parameters are declining. During January, at least two out of every three Air India flights from Mumbai were delayed. Typically, flights in and out of Mumbai for all airlines suffer maximum delays among the four busiest airports (Delhi, Hyderabad and Bangalore are the other three) due to airport specific issues. But Air India saw the worst performance among all domestic airlines, with just 33.7% of its flights on time from Mumbai against over 50% on-time percentage for all other carriers from the same airport.

Overall, 52.2% flights across Air India’s domestic network were delayed in January. A source close to the developments told The Federal that network wide delays worsened in December and January due to fog. He said delays due to fog were worse for AI than other airlines because AI is a network carrier and delays at one airport affected its entire network. This person said the ripple effect of fog delays on a single day was felt for nearly three days. Another reason for poor on-time performance was shortage of aircraft, with the nearly 14 grounded due to shortage of spares.

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One look at the DGCA data for calendar 2019 shows that the airline’s operational parameters have been declining for months now. Air India’s market share fell below 12% in January this year from over 13% in the same month last year. This, despite the demise of Jet Airways in April last year, which provided all domestic airlines an opportunity to attract more traffic. Private airlines benefitted from Jet’s demise but AI lost market share. SpiceJet began 2019 with just over 13% share of the market but had inched up to beyond 16% by December; IndiGo went from about 42% to over 47%.

December was no different

In December, Air India’s on-time performance at four busiest airports was dismal at 48%, it got only 33.6% of its flights on time at Mumbai during that month. Such massive flight delays are not just a matter of concern for regular AI flyers, they also result in payouts by the airline.

Air India had to shell out the highest amount of ₹1.18 crore in January for denying boarding to passengers, delayed flights and cancellations. Despite being the third largest airline in terms of passengers in the domestic market (behind IndiGo and SpiceJet), the number of people Air India had to compensate for delayed flights was the second highest at 69,000 flyers (market leader IndiGo offered only refreshments to nearly a lakh of its flyers for flighst delays).

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The source quoted earlier said that Air India continues to suffer due to lack of funds and still had 12 Airbus A320 aircraft grounded. “The engineering department needs nearly ₹1 crore daily for repairs but the airline is unable to provide this sum,” the source said. A few weeks back, AI’s dues to vendors and creditors were estimated to have crossed the ₹8,000 crore mark. This person also said that crippling shortage of cash to run daily operations may have been behind the recent change of guard at the top. Rajiv Bansal has succeeded Ashwani Lohani last week as the Chairman and MD of Air India.

Financial mess

Whether the government is serious about exiting the business of flying will be known once the disinvestment process progresses – Civil Aviation Minister Hardeep Puri has already said in Parliament that Air India will have to shut down if it fails to find a buyer as Air India’s finances are in a mess. Internal estimates from the airline’s engineers put additional investment needed by any potential buyer in sprucing up aircraft at a whopping ₹30,000 crore.

Besides all the operational glitches, AI continues to bring in massive losses. In 2018-19 (the latest available financial data), net loss increased by over ₹3,000 crore to reach the highest ever loss figure of ₹8,474.8 crore against ₹5,348 crore in 2017-18. Accumulated losses now stand at a whopping ₹62,694 crore and AI’s current liabilities exceeded its current assets by ₹65,245.87 crore as on March 31, 2019. Total debt on its books on that date was ₹58,255.9 crore.

And not only is the airline sinking deeper into losses, its subsidiaries are also not in the pink of health. During 2018-19, four of its six subsidiaries also reported losses; small profits accrued only from the two ground handling arms.

With such precarious finances, falling operational performance, substantial debt and thousands of crores needed to spruce up the aircraft of Air India, disinvestment of the airline continues to remain a challenge.