Air India may have improved its financial performance on the back of low fuel prices, but the Prime Minister's Office (PMO) doesn't seem convinced about the flag carrier's revival story. The PMO has asked the airline to improve its performance on all fronts said a report in The Economic Times.

 

It wants on-time performance improved to at least 85 per cent, revenues increased by 10 per cent and industry standards met on load factor, or capacity utilisation, and has also asked the airline to carry out a proper survey before inducting new aircraft. The targets were given at the PMO's first official review of the airline, convened by the Prime Minister's principal secretary, Nripendra Misra, on July 6. Loss­-making Air India is set to report an operational profit for FY16, helped by Rs 2,700 crore of savings on account of lower fuel prices and a one­time gain of Rs 1,200 crore from the sale and lease back of Boeing 787 Dreamliners.

 

But its revenue for the year is estimated to have increased only marginally even after accounting for the proceeds from the aircraft sale, which points to the risks faced by the state­owned carrier in an increasingly crowded market. The airline's operational parameters have fallen short of industry standards: its on-­time performance was the lowest in the industry at 74.3 per cent for May 2016, when its passenger load factor was 84.7 per cent. Spice Jet reported the highest load factor for the month, utilising 93.5 per cent of its capacity. A government official, who is aware of the discussions at the review meeting, said the PMO wanted Air India to improve its performance.

 

"There is no doubt that Air India's performance has improved but that is on the back of lower oil price. The PMO has said that the airline needs to improve its revenue, which has remained flat during the last fiscal (year). The industry, during the same time, saw revenue increase by about 10 per cent," said the official, who didn't want to be named. The PMO also noted that the "benefits of reduced ATF was outweighed by the reduction in revenue", the official added.

 

During the meeting, Air India chairman Ashwani Lohani said the airline needs more manpower and the government should allow it to hire. Lohani also wanted the retirement age at Air India to be increased to 60 from the current 58. The PMO didn't approve these, but asked the aviation ministry to look into the demands. "They said that the aviation ministry should examine both the proposals before taking a final decision," said the official. Analysts said a solution to Air India's problems could only be found after a detailed analysis by professionals.