REVIEW OF AIRLINE PERFORMANCE

OBJECTIVES The evaluation of airline performance is done basically across two metrics : 1. Financial performance 2.Operational performance

1.OPERATIONAL PERFORMANCE We base the entire discussion on the performance of AIR INDIA over the years 2003-04 and 2002-03 There are basically 14 operational metrics across which the operational performance is judged . We’ll discuss some of the imp ones in the coming slides .

AVAILABLE SEAT KILOMETER (ASKM) Measures capacity Calculated by multiplying the number of available seats with distance flown(in km) . For ex. An airline with 100 passenger seats flown a distance of 100 miles represents 10000 available seat kilometers . ASKM is basically a measure of an airline’s traffic – www.investopedia.com

PASSENGER KILOMETER (PKM) Defined as the number of passengers in the aircraft multiplied with the distance flown in kilometers . The number of passengers in the aircraft equals cabin factor multiplied by the passenger capacity for the aircraft type PKM=(cabin factor %)*(passenger capacity )*(flight distance km )

AVAILABLE TONNE KILOMETER (ATKM) The sum of the products obtained by multiplying the number of tonnes of capacity available for the carriage of revenue load (passengers ,baggage , freight &mail) . Status % change is the change over the equivalent month of the previous year. Can be used to carry any combination of revenue load . For ex . An airline operates one scheduled international flight per day , Payload =20tonnes , length =1000km Total ATKM =7,300,000(1000*20*365)

REVENUE TONNE KILOMETERS (RTKM) The sum of the products obtained by multiplying the total number of tonnes of revenue load on each sector multiplied by flight stage distance . For ax . An airline operates one scheduled international all cargo flight per day Length = 1000km, 10 tonnes of freight & 1 tonne of mail . Total RTKS performed in a year =4,015,000(1000*365*11)

ON -TIME PERFORMANCE On Time performance increased from 85% in 1999-00 to 88.5% in 2003-04 . RTKM/Employee (Revenue tonne kilometer per employee) improved from 84 in 1999-2000 to 113.5 in 2003-04 .

FLIGHT HANDLING Air India handled the following number of flights during 2003-04 Air India : 21,111 Flights of foreign airlines : 20,944 Other Flights : 1,245 The data shows constant improvised increment in the operations and handling of flights during the two years .

AIR INDIA FLEET SIZE & AIRCRAFT UTILISATION As of September 1,2004 Air India has the following data : Two B727-200 aircraft(VT-EFU & VT-EGB) are grounded since 29th january,2003 and march 6th 2004 . The average age of the fleet (owned and lease) is 14.9 years.

FLEET UTILISATION & DISPATCH RELIABILITY Utilization is given in terms of average daily utilization per aircraft in block time . The technical delays of duration 15mintues & above are considered for technical Dispatch reliability . AIRCRAFT AVAILABILTY On an average 85.9% of the fleet was made available for service during April 2003, March 2004.

EQUIPMENT SERVICEABILITY Equipment servicability during the year april 2003-march 2004 on an avarage was 96.34% BAGGAGE DELIVERY Statistics for the period 2003-04 Mumbai -94.17%, delhi – 97.89% ADDITIONAL OPERATIONS 104 additional flights were operated over & above the schedule resulting in , 528 hours of operation .

2. FINANCIAL PERFORMANCE During the year2003-04 the total revenue of AIR INDIA consisting of passenger, excess baggage ,mail , cargo ,charter and handling , servicing and the rest represented an increase of 10.2% The total expenditure for the company represented an increase of 12.3% Aviation Turbine Fuel (ATF) – due to the various adverse factors affecting the volume of oil production there has been a considerable increase in the amount spent on oil purchases by AIR INDIA.

Factors leading to decline in profitability of AIR INDIA The SARS (South African Revenue service) outbreak and Pilots Strike during the first quarter , April to June 2003 . Profitability of operations in the initial phase , in respect of the new routes with dry leased aircraft not in line with new estimates .

REVENUE PROFILE For every rupee that Air India earned during the year 2003-04 , three vehicles namely passenger, handling and freight constituted the bulk of revenue . Mail constitutes a very small portion of the total revenue % of the airline Non operating revenue also constitutes a significant revenue stream .

Excess baggage also warrants an investigation Over the year 2003-04 ‘passenger’ constituted a major portion of the revenue profile ; approx around 65.3% In addition to passenger ‘handling and service revenue’ constituted upto 10.6% of the revenue profile . Followed by passenger and handling revenue were freight , charter revenue , mail , and other non operating revenues.

EXPENSE PROFILE Personnel costs at 23.1% which is amongst the bulk of expenses . Sometimes this figure is understated because some of the services are contracted by the company . Fuel and oil expense is the 2nd largest operating cost of the airline . Adds to it are the rising ATF (aviation turbine fuel) prices which have the potential of destroying the company’s profitability .

Depreciation and Obsolescence costs constitute another significant component . The average of Air India fleet being 15.4 years , this cost is going to rise in years to come . Agency Cost at 5.9% is another significant cost that must be evaluated in terms of portion of revenue generated through the agencies .

PRESENTED BY Khushboo Godhwani Sumit Kuldeep Verma Abhishek Chamyal Sagar Shukla Dipak singh Amrita Parashar Neha Shukla