Air India to invest in IT to improve efficiency

Air India and IT investment
Is the ailing Air India getting ready to make investment in IT infrastructure to improve efficiency.

The India government on Monday directed Air India to use the best of information technology (IT) practices to bring efficiency in the functioning of the airline.

Ministry officials did not reveal details of IT investment for improving the efficiency of Air India. The state-run Air India is expected to report an operating profit of Rs 8-10 crore in FY 2016.

IT investment

SITA, a travel technology provider to the air transport industry, says 68 percent of airlines are investing in IoT programs in the next three years against 57 percent last year.

Today 37 percent of airlines operate connected aircraft and this will jump to two thirds by 2019. Over the next 3 years big increases in services are expected with more than half of airlines planning to provide destination services and duty-free shopping apps, while 70 percent plan to provide multi-media file streaming on passenger devices.

The initiatives to realize the Internet of Things include smart bag tagging to enable continuous tracking, which is planned by 61 percent of airlines by 2019. 47 percent of airlines are also planning IT programs for single token travel for passenger identification.

The majority expect an increase in their IT spend over the next year, this is a big change from 2015 when only around one third had positive expectations.

Other trends are the move to more software development in-house and the shift to outsource IT operations. In future a growing proportion of airline IT budgets is likely to be spent on innovation rather than service continuity with innovation increasing to 36 percent of IT and telecommunications spend in 2016.

Despite the fact that airlines have baggage tracking as part of their IoT plans, one quarter have no specific IT investment plans for compliance with IATA’s Resolution 753. However, 77 percent see a major benefit in improving customer satisfaction from compliance to the Resolution.

Air India budget limitations

India government has allocated Rs 1,713 crore during the 2016-17 Budget against the airline’s demand of Rs 4,300 crore.

By improving operational efficiency, Air India aims to bring down its net losses to less than Rs 2,000 crore in FY 2017. Air India’s turnaround plan envisages an equity infusion by the government of Rs 30,231 crore of which Rs 22,280 crore has been infused.

According to Ministry of Civil Aviation, the airline was directed to use the best of IT practices by Civil Aviation Minister Ashok Gajapathi Raju, who held a meeting with the top brass of Air India to review its functioning.

“The minister reviewed the status of monetisation by Air India so far and the hurdles if any,” said the ministry in a statement on Monday.

Civil Aviation Minister sought information on operation of MRO (maintenance, repair and operations) for advanced aircraft at Nagpur and Hyderabad.

The minister reviewed Air India’s strategy to increase its market share in the domestic and international segments.

Meanwhile, Air India is expected to report an operating profit of Rs 8-10 crore in FY 2016, the first since the erstwhile Indian Airlines was merged with it in 2007. Consequently, the state-run carrier’s losses would be limited to around Rs 2,600-2,800 crore, significantly lower than in FY 2015 when they were Rs 5,574.47 crore, according to a report in FE.

Air India’s revenues for FY 2016 are expected to remain flat since yields on both domestic and international routes have fallen following lower ticket prices. In FY 2015, Air India posted revenues of Rs 19,781 crore and operating loss of Rs 2,171.40 crore.