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Costly fuel to crimp AI Express net profit to under Rs 200crore

International Business
Sun, 04 Feb 2018

Mumbai: Air India Express, the international low-cost arm of the flag carrier, may see a plunge in profit in fiscal 2018 at around Rs 200 crore, down from Rs 297 crore booked in the previous year, driven down by rising fuel bills and a higher payout to the parent Air India.

The Kochi-headquartered Air India Express operates 555 flights a week, with a fleet of 23 Boeing 737 planes. It plans to induct two more such aircraft planes by August-September, according to a senior official.

The airline will also be the first to operate to and fro from the upcoming Kannur international airport in its home state Kerala where it deploys over 65 per cent of its capacity.

"This time around I expect the bottomline to print in at around Rs 200 crore," K Shyam Sundar, the chief executive officer at the airline, told PTI here over the weekend without ascribing a reason.

In fact, reflecting the fuel prices, in the last year also, its profit was lower than the previous year. After the first Rs 100 crore profit in FY15, its profit soared to Rs 361.7 crore in FY16 but came down to Rs 296.7 crore in FY7.

But it can be noted that all the airlines have had an easy life last fiscal as crude oil hovered USD35-40 a barrel throughout the year, but the same is trending at USD 70 and the average for this year could be around USD 60 a barrel. Which is an almost 50 per cent spike over the last year's average.

Airlines across the world, barring of course those in the Gulf nations, burn almost half their cash on fuel alone. In Indian context, since petroleum products are out of GST, it varies from a low 4 per cent in states like Telangana to an absurd 34 per cent in Maharashtra.

Air India Express, which flies to the Middle-East (West Asia) and Southeast Asian destinations, booked its first profit in FY15 with Rs 100 crore after it was set up a decade ago in April 2005 on the back of a 25 per cent plunge in crude prices in the year.

Sundar said he expects the load (PLF) to increase by 150 bps next fiscal over the present 78.5 per cent, as he also expects the aircraft utilisation levels to go up to 6-7 per cent over 14 hrs from 13.25 hrs with the introduction of the two new 737 NGs planes.

On the volume side, Sundar expects to ferry 4.5 million next fiscal year. In FY17, it carried 3.4 million passengers. He didn't offer a number for this year.

Sundar said AI Express will be the first airline to operate from the greenfield airport in Kannur, northern Kerala.

The fourth international airport in the tiny state is scheduled for commissioning this June, behind more than a year.

"We committed to Chief Minister Pinarayi Vijayan that we will be the first airline to take off from Kannur. We will be deploying the two new aircraft in this facility,? he said.

"We will also launch a new service between Kochi and Bahrain soon,"he added.

On OTP (on-time performance), he said the overall it's 86 per cent but this is 95 per cent from the country. The delay is due to longer time we have to take to skirt the Oman airspace now.

On the payout to the parent Air India, which is put on sale now, Sundar said, "in FY17, it paid Rs 450 crore, while this was Rs 350 crore in FY16. This is year it may go up further, which will impact the bottomline.

"On top of this, we have around Rs 200 crore of financing cost towards aircraft loans per annum. But FY19 should be better as our finance cost will come down to Rs 150 crore," he added.

The airline connects 13 international cities from 17 domestic cities.

On the domestic front, it connects Thiruvananthpuram- Chennai, Kozhikode-Thiruvananthpuram, Kochi -Thiruvananthpuram and Kochi-Kozhikode, as per its website.