As per a report in The Economic Times, national carrier Air India has missed its financial performance targets by a huge margin. The airline agreed to these targets with the government in order to receive a whopping Rs.30,000 crore ($6 billion at the time) tax-payer funded bailout.
The national carrier already saddled with debts exceeding Rs.40,000 crore ($6.8 billion) has missed its turnaround target of Rs.3,989 crore by over 25 percent and posted a net loss of approximately Rs.5,000 crore ($848 million) for the fiscal year 2013~2014 ending on March 31. In the last fiscal (2012~2013) the carrier recorded a loss of Rs.5,198 crore.
Revenues too were off-target by nine percent at Rs.17,750 crore instead of the projected Rs.19,393 crore. Revenues in the earlier year were Rs.16,130 crore. Ebitda (Earnings before interest, taxes, depreciation, and amortisation) rose to Rs.770 crore from Rs.19.45 crore a year earlier, but still missed the target of Rs.1,040 crore.
It is important to appreciate the magnitude of this under performance since this was the first full fiscal year when competition in the full service sector was significantly reduced due to the implosion of Kingfisher Airlines. The future does not bode well for Air India as the Tata-Singapore Airlines joint-venture full service carrier is due to commence operations later this year and New Delhi will be its hub, which is also the hub for Air India.
Apart from the tax-payer funded bailout, the airline also receives indirect sops in the form of government guarantees which reduces interest expenses, permission to issue tax-free bonds to attract capital, extra-long credit from the government owned oil marketing companies and airports, and government rules which mandate all government travel on Air India.
The story of the national carrier appears to be a never-ending litany of failed promises and consistent under-performance. The airline has even missed basic cost cutting targets and asset sales targets to generate revenues. It appears the airline is accustomed to just The new civil aviation minister has indicated the government will examine all options for the beleaguered Maharajah, but will it hold the management of the airline responsible for failing to perform? Has the time come to question, when is enough, enough?
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