Air India tinkers with operational costs to save money

Pilots may have hijacked Air India’s plans to reduce staff costs by snipping their productivity-linked incentives (PLI) by up to 50%, but the state-owned carrier is continuing attempts to become leaner and meaner.

For example, the flag carrier has scrapped foreign travel privilege for its employees, so those seats are now generating revenues.

A senior AI executive, who did not want to be named, said the airline has also called back four executive directors who had been deputed to other countries, as part of the airline’s cost saving measures.

“The management has decided that it would cut down on corporate foreign travel of its employees, especially at the executive level, indefinitely. These seats are now being utilised for the paid passengers,” the AI executive said.

He added that while the airline may not be able to do much on the fuel and employee costs, over 50% of operational expenditure can easily be tinkered with. That is where the airline is focusing its energy on.

It is aggressively renegotiating ground-handling contracts when they come up for renewal, taking advantage of its scale of operations — having been merged with Indian Airlines — to bargain for better deals and steep discounts.

AI is looking to save Rs 200 crore per month on passenger amenities, ground handling, consumables, etc. It plans to save Rs 100 crore a month on fuel costs by optimising aircraft utilisation.

“Optimisation of our fleet utilisation will lead to better fuel consumption and save up to Rs 100 crore per month,” said the official.

To improve cash flow, the carrier is in the process of converting 10 twin-class Airbus 320s into single class — all-economy — aircraft for medium-haul international destinations. The converted aircrafts will be inducted into the fleet from October 25. when Air India launches its winter schedule.

“Some of these A320s were inducted in our fleet in the early 90s. We are in the process of modifying them for our new routes on the international segment of Air India Express,”’ said the official.

He said the aircraft will have 168 economy seats in all after the 20 business-class seats are removed. The cost incurred on conversion of the aircraft will be marginal.