Air India could incur a loss of nearly Rs 35 cr a day due to suspension of operations

Air India usually makes roughly Rs 65 crore a day, 90% of which comes from passenger revenue.
Air India could incur a loss of nearly Rs 35 cr a day due to suspension of operations
Air India could incur a loss of nearly Rs 35 cr a day due to suspension of operations
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Out of the industry sectors to have been directly impacted by the Coronavirus lockdown is the aviation sector. Air India, already under a huge financial strain, reportedly stands to lose around Rs 30 crore – Rs 35 crore each day.

Though some expenditures like aviation turbine fuel and airport fees related to handling flights need not be incurred, the fixed costs cannot be avoided. These include lease payments for the aircraft and salaries.

According to the figures available, the national carrier gets a revenue of around Rs 65 crore every day, which comprises collections from the sale of flight tickets to passengers.

In the normal course, this would cover the airline’s expenses and it can even retain some earnings before things like taxes, interest etc. apply. This is more commonly referred to as EBITDA and Air India was EBITDA positive before the lockdown. Now, with domestic and international flights cancelled all over, it will have to incur heavily from its own sources. The monthly salary bill alone is Rs 250 crore. Then the aircraft lease payments have to be made. There are 21 Boeing B787-800s on lease and the payment towards their lease is $1 million per month.

Another $400,000 has to be paid per Airbus A320New aircraft on lease. The outgo on account of interest is a hefty Rs 225 crore a month. As things stand, there is no clarity on how long this lockdown will last. The longer the shutdown duration, the worse will be the situation with the airlines including Air India.

The process of finding a buyer for the airline will also be deferred and that could put more pressure on the airline’s finances.

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