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Air India clocks its first operating profit in 8 years

A decline of nearly 31 percent in fuel costs in the last financial year compared to the year-ago period was a key factor in the airline becoming operationally profitable.
Air India

After 8 years of merger with Indian Airlines, Air India has for the first time reported an operating profit of Rs. 105 crore in the last fiscal. It is to be noted that the state-owned airline, which is trying to stay afloat with Rs 30,000 crore bailout from the government, had reported operating loss of Rs. 2,636 crore in 2014-15.

According to media reports, a decline of nearly 31 percent in fuel costs in the last financial year compared to the year-ago period was a key factor in the airline becoming operationally profitable. It has been duly pointed out that this fuel cost benefit was transferred on to passengers, which has been reflected in the lower yield—an indicator of ticket prices—which declined by 7.7 percent.

In a positive result for the airline, it has been reported by Firstpost that in 2015-16 Air India carried 18 million passengers, growth of 6.6 percent from its 16.88 million in year hence. Airline’s operational cost per average seat kilometre came down from Rs.4.59 in 2014-15 to Rs.3.88 in 2015-16, The Hindu reported. However, revenue declined from Rs 20,613 crore in 2014-15 to Rs. 20,526 crore this year.

Earnings before Interest, tax, depreciation, amortization and rentals (EBITDAR) rose to Rs. 3,587 crore in the fiscal from Rs. 1,436 crore in 2014-15, which is an indicator of improved operating performance, Times of India reported. The airline’s capacity deployment and aircraft utilization went up by 4.8 percent and 7.5 percent, respectively, it added. On account of currency fluctuations, the carrier incurred a forex loss Rs. 350 crore in 2015-16.

“It is not correct to say that our operating profit came due to fall in oil prices alone. Of course, that has helped but we have focused on adding routes, enhancing network and improving services to attract passengers. Aircraft utilisation has gone up. All these factors, including oil, helped us report the profit,” an official said to Times of India.

Having an operating profit in a decade is an encouraging sign for the airline, which is seeking to turn around its fortunes amid stiff competition, sources said to media.

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