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Last Updated : Oct 14, 2014 06:33 PM IST | Source: Moneycontrol.com

Will Air India chairman Rohit Nandan's term extension help?

Nandan took over as chief of the carrier in August 2011, in a financial year when its losses had widened to Rs 7,559 crore, and was given a three-year term.

Moneycontrol Bureau

The government on Tuesday extended the tenure of Air India chairman Rohit Nandan by 10 months, or till it finds a replacement for him, after seeing distinct signs of improvement in the performance of the flag carrier.

Nandan took over as chief of the carrier in August 2011, in a financial year when its losses had widened to Rs 7,559 crore, and was given a three-year term.

In the four years prior to Nandan’s appointment, turbulence at the firm had witnessed the entry and exit of four chairmen, according to a report in Mint.

Nandan’s appointment was extended by the Appointments Committee of the Cabinet after a request by the Civil Aviation ministry, which said a new appointment right now may disrupt continuity of plans chalked out to improve Air India’s performance.

The flag carrier has seen its losses balloon from about zero in fiscal year 2004-05 to about Rs 7,559 crore. This was partially due to a disastrous merger with Indian Airlines, rising fuel and interest costs and a gradual decline in efficiencies.

After taking over, Nandan along with the government revealed a plan (that envisaged an equity infusion of Rs 30,000 crore) to turn around the ailing firm by 2020 – with focus being on improving its operational efficiency, streamline routes and cut costs across the board.

Since then, Air India has witnessed signs of improvement in performance, with net loss coming off from Rs 7,559 crore in FY12, to Rs 5,490 crore in FY13 and Rs 5,338 in FY14 (See chart below).

Improvements have been much better at the operation level, with losses at the EBITDA level, nearly halving from Rs 3,800 crore in FY13 to about Rs 2,100 crore in FY14.

In fact, in FY14, the airline either met or came close to meeting many of the targets prescribed in the 2020 turnaround plan.

For instance, according to a report in the Indian Express, Air India’s domestic load factor rose to 75.8 percent up from 73.7 percent in FY13 (target: 75 percent), it managed a high yield per kilometer, and a substantial increase in the number of passengers carried while the on-time performance stood at about 90 percent from all metros, which was close to the TAP’s 2020 target of 93 percent.

It also withdrew from several loss-making sectors, especially on the international routes, and streamlined its operations to bring on more fuel-efficient aircraft such as the Boeing Dreamliner.

Recently, it also became a member of the prestigious Star Alliance, a body of top carriers globally, which should further help it improve its brand image as well as business by offering passengers access to using mileage points across the network as well as access to lounges of other members.

First Published on Oct 14, 2014 03:36 pm