INDIAN AIRLINES : CRUISING STEADY
By Our Special Correspondent

For Indian Airlines the year 2000-01 is significant for more than one account. While disinvestment process has entered the crucial final stage, the airline's bottom line has slipped into red after three years of continuous profit, thanks to the massive fuel price hikes. While the airline regained the market leadership, the burning issue confronting the airline - the fleet renewal plan - is yet to be addressed seriously. IR problem which hitherto used to plague the airline is evidently under control, though the employees' productivity continues to be the subject of public debate. It is against this backdrop analysis of the physical and financial performance of the public sector giant during the period; particularly the IInd half of 2000 and 1st half of 2001 is of topical relevance. 

Physical/Financial Performance 
The operational performance of Indian Airlines during the year 2000-01 has shown a marked improvement over the previous financial year on all parameters. The Available Tonne Kilometers (ATKms) recorded for the year was 1146.388 million compared to 1120.926 million for the previous year, while the Revenue Tonne Kilometers (RTMks) was 773.375 million compared to last year's 740.285 million. The financial performance also exceeded budget estimates with the operating revenue being Rs. 3758 crores - a 5.9% growth over the previous years revenue of Rs. 3549 crores. The total revenue posted during the year is estimated to be Rs.3766 crores, up from the Rs. 3565 crores last year. The airline recorded higher load factors of 67.5% and seat factor of 65.7% whereas last year's load and seat factors were 66% and 64% respectively. The number of passengers flown has also gone up from 5.927 million in 1999-2000 to 6.007 million in 2000-01. On the financial front, however, the airline had to face setbacks primarily due to two successive hikes in the price of Aviation Turbine Fuel (ATF), by 18.3% in March, 2000 and again by 25% in September 2000. The cumulative impact of these hikes which pushed up the cost of ATF by 48% was an additional financial burden of over Rs. 300 crores.
Despite the massive hike in fuel and other input costs the airline held the price-line knowing fully well that it would impact the bottom line. As against the budgeted profit of Rs. 28.75 crores, the airline ended the year with the loss of Rs. 177.25 crores.

The Fight For Market Share
The year 2000-01 saw the airline engaged in a grim battle for market share with its main competitor Jet Airways. The unfortunate crash of an aircraft belonging to Alliance Air, the subsidiary of Indian Airlines, in July 2000 created a fear psychosis among the travelling public. As a result, passenger load declined sharply and the market share of the airline dropped to a low of 44.3% in August 2000. The management took a number of steps to win back the confidence of the passengers. Some of the major steps were refurbishment of the entire Boeing 737 fleet, improved in-flight service, closed monitoring to improve on time performance. It was against this background of declining market share that the airline management under the stewardship of Mr. Sunil Arora took a bold decision to hold the price-line. The strategy of holding the price-line and simultaneously bringing about all round improvement started yielding results in a couple of months time. By December 2000, passengers had reposed their confidence in the airline and the market share rose to 51.5%. The airline ended the year with a market share of 50.5%. Capacity induction While the battle for market share was on, airline took steps to consolidate its position by augmenting capacity. Since the fleet renewal programme was put on hold pending the disinvestment a decision was taken to add capacity by leasing aircraft resulting in induction of two Airbus A320.

Induction of Pilots
After a gap of over a decade the airline recruited 60 trainee pilots. Since the induction of pilots is a time consuming exercise, the airline rightly took the step to ensure that there will be no shortage of the highly skilled manpower when the airline embarks on induction of additional capacity.

Marketing Initiatives
The fight for market share having been won by December 2000, Indian Airlines turned its attention towards marketing initiatives. The first of this was a strategic tie-up between Indian Airlines and American Express to launch a co-brand card.

This card was specifically targeted , at the frequent flyers and offered them a range of incentives to fly Indian Airlines. The airline also tied up with various hotel groups to provide attractive tour packages to popular destinations such a Jammu, Cochin, Goa, Bodh Gaya (Patna), Jaisalmer and Jodhpur. The introduction of flexible fares on 25th May marks the airline's latest salvo in effective utilisation of Price (one of the four essentials of marketing) to maintain its status of market leader.

In a clear departure from the conventional across-the-board price and policy, Indian Airlines decided to increase airfares selectively on only 68 of the 165 domestic routes. The price hikes averaging 9% are not uniform and vary from sector to sector based on parameters such as market share, flight timings, and seasonality of traffic.

Outlook for 2001
Statistics compiled by DGCA reveal that the passenger traffic growth has been a meagre 1.4% from January to April 2001 compared to the same period last year. While the total domestic passenger traffic was 44.65 lakhs this year, it was 44.04 lakhs last year. Indian Airlines, however, has reasons to cheer as the market leader recorded a 66% seat factor in April, a clear 2% lead over its rival Jet Airways. The trend has continued in May also with the airline recording a seat factor of 67% and an average daily passenger carriage of 22,670 – an 8% improvement over the May 2000 average of 20,880 passengers. Keeping in view the positive developments over the past one year, it is obvious that the airline has pulled out all stops to keep flying on a steady course.