Air India seeks states' help to boost connectivity, plans to generate higher revenues

NEW DELHI: Air India has for the first time approached states directly with an offer to provide connectivity to these regions with smaller aircraft available with its subsidiary Alliance Air, a move it hopes will fetch higher revenues.

Air India CMD Ashwini Lohani has written to all state governments offering Alliance Air aircraft for providing regional connectivity under the viability gap funding model.

"We would be honoured if a state prefers to operate ATR 72-600 aircraft to boost air connectivity. We request you to advise us on your plans of operations to enable us to acquire and position our ATR aircraft in sync with your proposal under the VGF arrangement," reads Lohani's letter seen by ET. The flights will be operated under the VGF model. "We would operate flights to areas desired by states and can also offer fares decided by them if states agree to FUND losses through VGF," said a senior Air India official, on the condition of anonymity.

With these businesses, Air India, which has accumulated losses of Rs 20,000 crore, is aiming to turn profitable on a yearon-year basis by 2018-19. The airline is expected to post a consolidated net loss of Rs 5,400 crore by the end of March 2016. But on an operational basis — which typically excludes interest, tax, depreciation, etc., — it is projected to become profitable by the end of this fiscal year. As many as eight states, including Gujarat, Madhya Pradesh, Rajasthan and Uttar Pradesh, have shown interest in the airline's proposal.

"We expect a lot of other states to show interest, as apart from connectivity, states will not have any problems in getting into a commercial agreement with a public sector undertaking company," said the Air India official.

Another official of the national carrier said they will soon get a board approval on inducting nine more ATR aircraft in the airline. "We will soon move a proposal for taking nine more ATR aircraft on lease," he said.

Alliance Air currently has a fleet of 10 aircraft — 7 ATRs and 3 CRJs — in its fleet, which is used to connect areas in the north eastern part of the country and also destinations in hilly states of Uttarakhand and Himachal Pradesh.

While the airline management is hopeful of a surge in revenues through this scheme, former Air India employees say that dealing directly with states has its own risk.

"The idea could work wonders if states are regular and prompt with payments. The airline will see a huge surge in revenues if it works towards aggressively selling Air India," said a retired Air India official.

Meanwhile, the airline is also launching tourism packages with state tourism boards and has termed it Incredible Air India Packages. "We are looking primarily at weekend packages and have tied up with states," said one of the officials quoted above.