Ashwani Lohani, an Indian Railways Service of Mechanical Engineers officer, who took charge as the new chairman and managing director of the loss-making Air India on August 31, will probably face his first test in the coming days. This is because one of the national carrier’s pilot union, Indian Commercial Pilots’ Association (ICPA), is conducting
a secret ballot to decide whether to declare a strike against a recent notification by the airline management removing pilots from the workmen category.
The outcome of the ballot is expected to be known by sometime next week, and if the news is not good, all eyes will be on the new CMD to see how effectively he tackles the crisis. His innings, as it is, did not begin on a positive note. The day he took charge, the pilots’ union asked its members to stick to what is called ‘work to rule’, or sticking to flight duty hours and rejecting any request to extend working hours in case of a flight delay. This is because the pilots are miffed with the decision of the airline to put commanders out of the workmen category of the Industrial Disputes Act. This means commanders can no longer be part of trade unions and their service conditions can be changed and they will not be able to raise a dispute against their employers.
Even if Lohani is able to tackle these immediate challenges, there are important long-term ones, which would test his mettle. Since during his previous stint as the head of Madhya Pradesh Tourism Development Corporation, he did a creditable job by successfully putting the state on the tourism map of the country, there’s hope that he might be able to turn around the airline, a tough task considering that several of his predecessors have failed.
While the airline has made some improvements on certain parameters, it’s still far from meeting the turnaround plan drafted for it, based on which it has been given a R30,000-crore bailout package by the government.
In order to be eligible for government equity infusion, Air India, which is reeling under a heavy debt burden of over R44,000 crore, has to meet certain operational and financial parameters laid down under a turnaround plan (TAP), which was drafted by SBI Capital Markets in February 2012. During FY15, the airline’s top line was at R19,781 crore, as per a parliamentary statement, lower than an internal estimate of R21,300 crore, and a TAP target of R23,569 crore.
Similarly, the airline reported a net loss of R5,547 crore, against the internal target of R4,346 crore, which is also higher than the TAP target of R3,241 crore. The government has pumped in R2,500 crore in 2015-16, R5,780 crore in 2014-15, and R6,000 crore each in 2012-13 and 2013-14 into the airline.
Further, in this year’s supplementary demand for grants, R800 crore was provided as additional equity infusion. The airline is expected to cut its net loss by about a third to R3,500 crore during the current fiscal as a result of a significant reduction in fuel costs and improvement in operating performance. It is also expected to report an operating profit of about R10 crore during FY16, its first annual operating profit since the implementation of the TAP in 2012, provided crude oil prices remain below $70 a barrel.
Jet fuel prices, which constitute about 45-60% of airline’s expenses, have fallen over 30% in the last year.
The challenge for the new CMD will be to run Air India as efficiently as some of the private airline’s are run and balance the social obligations of the national carrier with that of making profits, a senior Air India official had earlier told FE.
“I think a good point to start is to get the On Time Performance (OTP) of the airline on a par with the market leaders. If Air India achieves that, it will not only strengthen the brand and attract more passengers, but also help reach profitability faster,” the official said.