For the first time, Air India has appointed a chief operating officer (COO)?in addition to the chairman and managing director (CMD)?who is not from erstwhile Air India or Indian Airlines and is in fact a foreigner. Gastav Baldauf, former executive VP Austrian Airlines (flight operations) and also former VP Jet Airways, was selected out of 160 applicants. He will take over the executive function of running the airline.
To me, the policy of appointing an outsider is good because it is expected that a foreigner would have no bias towards either of the two entities or the ministry. He would, therefore, be completely neutral in relation to the ruptured personnel policies of the merged entity. However, the Cabin Crew Association of Air India has taken a strong objection to his appointment, especially because he used to work for Jet Airways. The association has insinuated that this is a ?deliberate design to kill the carrier so it can be swallowed by some cash-rich airline in a friendly takeover?. One cannot totally ignore this allegation. It would be preferable if the new COO had no erstwhile links to any Indian airline to avoid a bias. The merger is now three years old and the airline, instead of picking up, is showing signs of terminal illness. Only an experienced and detached person can deliver the surgical operation necessary, especially in view of the damaging report by the Committee on Public Undertaking (COPU) in the Parliament.
COPU has gone through many sittings; called to the table all the main functionaries of the National Aviation Company of India (Nacil), the new merged entity, and the ministry of civil aviation; taken their oral and written evidence; and has given a very detailed report. It is COPU?s conclusion that the root cause of the malaise affecting Nacil is the very merger that brought this entity into being. COPU considers the merger ?flawed at its very inception? and also a ?whimsical decision?.
The committee has come out very strongly against the ministry of civil aviation, stating that the ministry has shown little initiative in monitoring the merger process. It has accused the ministry of an ?utter lack of sincerity?. COPU also recommends that all the loss attributable to the merger of Air India and Indian Airlines should be ?recouped? by the government, since the decision to merge was a policy decision spearheaded by the ministry in charge. Further, it has stated that the failure to resolve issues pertaining to the integration of human resources reflects poorly on the performance of managers of the merger process. It recommends turning Nacil into a holding company under which two separate wings?erstwhile Air India and Indian Airlines?will function, each headed by a managing director reporting to the chairman of Nacil.
COPU?s recommendations cannot be brushed aside easily. In this scenario, if the recommendations of COPU are accepted, the role of the COO needs to be considered in its wider perspective. Can the COO be common to both entities? Can he direct the synergies of the companies and report to the two managing directors, or can he work for Nacil and the two companies? A lot of work would be required of the COO in coordinating the activities of the two companies, if a decision is taken to demerge them under Nacil.
During the presentation of evidence to COPU, the CMD of Nacil admitted that there is lack of corporate work culture in the company. The new COO, who has come from Austrian Airlines where the work culture is considered good, can introduce new work ethics, best practices and greater accountability. It may be restated that Air India in its early years was considered one of the top airlines of the world. But due to many factors?including deterioration of work culture?it came down in public perception and lost its market share. It is this public perception that the new COO has to revive as he builds up a team.
Nacil has placed orders for 111 new aircraft of different makes and sizes with a sovereign guarantee, of which about half have already arrived. There is a feeling that such a large order is no longer viable for a fledgling airline like the merged Air India. In fact, Air India has started cutting down on uneconomic routes and it is giving away its traditional passengers to other airlines, some foreign and some Indian. There has also been an argument that the ministry of civil aviation gave away too many bilateral air service rights in the international sector, which Air India could not take advantage of because of its small, old fleet and poor work culture, allowing other airlines to reap the benefits.
Be that as it may, Air India, with its new fleet, has the opportunity to win back its passengers, if it puts its act together. Not only that, with the opening of new terminals in Delhi, both domestic and international carriers will be in one building for the first time. There will be scope to create not only domestic but also an international hub at this airport. Air India has the unique opportunity to make the best of this situation for which aggressive marketing is required, an option available to the new COO. Meanwhile, it has been reported in the press that Jet and Sahara have increased their international flights, adding new destinations, and Jet has also leased out three of its Boeing 777 to Thai Airways so that their idle aircraft capacity starts earning. This leaves the new COO with little time to segue in and he must act straightaway.
Within the merged entity, there is the potential for huge savings and earnings by improving and offshoring its non-flying business. For example, the engineering works on both the erstwhile entities can be made into subsidiaries and tied up with strategic partners to bring in the required economies and efficiencies. Some work, it appears, has been done on the ground handling side, but it is still tentative.
The COO should be given a free hand and back-seat driving should be totally stopped.
?The author is chairman of the International Foundation for Aviation, Aerospace and Development. He was also formerly a director on the Board of Air India.
sanat_kaul@hotmail.com