Air India to cut routes, keep ‘profits’ as paramount

In what is likely to be the first step in turning around the embattled state airline Air India, the civil aviation minister has set up a committee to come up with a list of routes that need to be eliminated.

The move, coming in the wake of a crippling pilot’s strike, is intended to cut costs at the bleeding airline and return it to profitability.

The new policy will look at “profitability as the most important objective,” the ministry said.

Air India has been hit by fierce competition from private and international airlines, even as its own costs have risen in the last one year due to high jet fuel costs. Hit by a cash crunch, it has been unable to even pay salaries, prompting its pilots to go on strike.

The committee will “examine route profitability of Air India and make its recommendations to rationalize the same keeping in view the overall objective of profitability,” the ministry said.

The committee will report within a period of one week.

The flights will be identified in four categories:

1) Profitable routes
2) Meeting operating costs, but not fixed costs and therefore not meeting total costs
3) Meeting fuel costs, but not meeting total operating costs such as salaries
4) Not even meeting fuel costs

Depending on the above, flights will be eliminated, the ministry said.

The committee will give route-wise recommendations in terms of withdrawal and continuance of flights during current summer schedule and making them profitable.

The members of the committee are G. Asok Kumar, Joint Secretary, Syed Nasir Ali, Director (both from the civil aviation ministry), S.C. Sharma, Executive Director, AAI and Lalit Gupta, Dy. DG, DGCA.

Many critics have called for the dissolution of the company or its privatization, arguing that the government should not put taxpayer’s money into running an unprofitable airline when there are several private airlines operating in the country.

The current move seems to be a mid-way solution that seeks to slim down the national carrier without shutting the company down.