Air India Express to clock net profit of Rs200 crore in FY16

Mumbai: Air India Express, the low-fare international unit of Air India Ltd, is expecting to post a net profit of Rs.200 crore in 2015-16, airline chief executive officer K. Shyam Sundar said on Wednesday.

The airline posted a net loss of Rs.60 crore in 2014-15.

The airline, he said, aims to make a net profit of Rs.200-250 crore for the next financial year (2016-17) on account of fall in jet fuel prices and higher seat occupancy of 83%.

In 2015, the price of benchmark Brent crude oil fell 35%, while in 2014, it fell 48.3%. In India, fuel costs account for about 45-55% of the revenue of domestic airlines, and a 4% drop in fuel cost adds around two percentage points to the operating margin of airlines.

To further improve its profitability by saving interest cost, the airline is planning to convert its rupee loans into dollar loans. “To complement the profitability efforts, we are planning to convert our rupee loans of Rs.1,500 crore into dollar loans via external commercial borrowings (ECB),” Sundar said in an interview.

The Kochi-based airline will be able to get dollar loans at 2-3% as against 12-13% interest on rupee loans if the airline manages to raise funds via ECB, he said, adding that the airline is in talks with merchant bankers and banks, including State Bank of India.

Air India Express will also expand its fleet of 17 Boeing 737 aircraft by adding six more by November.

The airline has emerged as a tight organization in terms of networks and operations though it is largely known for its Kerala tag, said Kapil Kaul, chief executive-South Asia, at consultancy firm CAPA India.

Currently, at least 60% of the flights originate from Kerala.

“Gradually, Air India Express will shed its image, as the airline is launching several flights from other Indian states. Shortly, the flight ratio will come to 50:50 for Kerala flights and services from other cities,” Sundar said.

It also plans to launch flights from Delhi to Sharjah and Dubai from mid May and flights from Mumbai, Madurai and Chandigarh to West Asia.

Kaul of CAPA said the airline is finding it tough to hire pilots to meet its expansion plans.

Sundar said the situation is “manageable” and added that the airline is hiring pilots from abroad to tide over the shortage.

Sundar said Air India Express is planning to offer paid meals of a customer’s choice by early next financial year. Currently, it offers free vegetarian meals on board.

Air India