‘AI hopes to save Rs 1,100 cr thru merger by year-end’

New Delhi, May 4 Air India hopes to achieve a saving of around Rs 1,100 crore by the end of this financial year, through its merger with Indian, the Chairman and Managing Director, Mr Raghu Menon, has said.

While the airline has already reported a saving of about Rs 300 crore by integrating the schedules of the two airlines, it hopes to save another Rs 800 crore by the end of the financial year by rationalising the marketing and sales, procurement, engineering and ground handling efforts among other things, he said.

The schedule integration saw Air India put in place a new hub and spoke flight plan for flights being operated from and to Delhi, Mumbai and Kolkata primarily, with a 145-seater Airbus A-320 aircraft.

Cutting costs

Earlier, the airline used the larger Airbus A-310, Boeing 777 and Boeing 747 aircraft. “The airline now operates 34 hub and spoke flights with the Airbus A-320 aircraft as compared to only eight earlier; this helps us reduce the running costs,” Mr Menon said.

In the global arena, the airline has realigned its operations to 13 destinations, including Bangkok, Kuala Lumpur, Singapore and Kuwait, to ensure that there is no overlap of operations as was the case when both Air India and Indian used to operate.

The airline has been able to lower costs in other ways also. NACIL negotiated a reduction of $5 million in the insurance renewal payout for the erstwhile fleet and also saves around Rs 200 crore on account of bulk purchase of fuel for the combined fleet, instead of the earlier practice of both the State-owned airlines procuring it individually.

Several of the methods adopted by the airline to cut costs are part of a road map drawn up by the global consulting firm Accenture for the merger to be successful.

Source: Businessline