NEW DELHI: Air India has further reduced approximately 200 weekly flights from June to August, including several long-haul services, in an effort to curb losses amid a sharp increase in jet fuel prices and the rupee's depreciation. These reductions are in addition to the roughly 90 flight cuts made in May. The airline, which previously operated around 1,200 daily flights, is implementing cost-cutting measures after suffering a loss of over Rs 22,000 crore in the last fiscal year, with the ongoing conflict in West Asia showing no signs of resolution.
Details of Recent Flight Cuts
In the latest round of cuts, several routes have been temporarily suspended. These include the thrice-weekly service between Delhi and Chicago; four times weekly flights between Delhi and Newark, Delhi and Shanghai, and Mumbai and New York; and daily services between Delhi and Male, Chennai and Singapore, and Mumbai and Singapore. Comments have been sought from Air India regarding these latest cuts, but a response is pending.
Financial Viability and Demand Challenges
Amid the significant rise in operating costs, airlines globally, including Air India, are evaluating each route based on financial viability. Passing on the entire increase in operating costs would lead to a sharp rise in airfares, resulting in decreased demand as only essential travel would occur at those prices, with discretionary and non-essential travel being postponed. Prime Minister Modi recently urged a reduction in foreign travel, promoting work-from-home and virtual meetings. Consequently, overall travel demand is expected to weaken further. In this scenario, airlines are cutting flights due to high operating costs, low demand, and weak economic sentiment, where non-essential travel such as holidays is often the first discretionary expense to be cut by both individuals and corporations.
Cost-Cutting Measures Beyond Flight Reductions
Air India is exploring multiple avenues to control burgeoning costs, including human resources-related measures, though job losses are not currently anticipated. The airline is planning to make meals optional on its domestic and short international flights (under two hours). If this unbundling is implemented, passengers who opt out of meals could see a reduction of upwards of Rs 250 in their ticket price. While opting out of meals could lead to slightly cheaper economy tickets, Air India is also considering unbundling lounge access for business class passengers. Those who forgo lounge access could obtain cheaper tickets. On average, lounge operators charge Rs 1,100-1,400 per user at metro airports and Rs 600-700 at non-metro airports, with an average spend of about Rs 1,000 per lounge. Many business class flyers are frequent travelers who arrive at airports just in time for their flights and do not use the lounge. Unbundling this service could result in savings on ticket costs. Banks have also been reducing lounge access for credit card users for similar cost-cutting reasons.
