In an office order dated September 24, 2009 halving the productivity-linked incentives of Air India executive pilots with retrospective effect, Air India stated the obvious right in the beginning: if no efforts are made to enhance revenue and control costs, the airline is likely to suffer losses of the same order this fiscal as in the last fiscal year. In 2008-09, the airline incurred losses above Rs 5,000 crore accounting for over 50% of the total losses made by the Indian carriers.
It was the same order that led non-unionised management grade pilots to shun work for almost five days, protesting at the pay cut, causing a loss of Rs 100 crore.
While the order has been put in abeyance for now, one wonders what will happen to the ambitious turnaround plan that the airline has embarked upon, having publicly stated that it will be profitable within two years, by 2011. While Air India has bought peace, sources within the airline say that it is the lull before the storm, and will not last beyond a month, given the airline?s turbulent past withunions.
The strike came soon after the Committee of Secretaries (CoS) gave its nod for an equity infusion of Rs 5,000 crore and finance ministry concurred, not before it came down heavily on the carrier, asking it to shed flab and achieve the stated milestones in the turnaround plan. Air India shall now prepare a proposal for equity infusion to be taken up by the Union Cabinet. Till, then it will have to struggle to ?make ends meet? in a ?hands to mouth? situation, as put by its CMD Arvind Jadhav, who took over reins a little over six months ago.
As for its turnaround plan, the airline had decided to form six separate business units (SBUs) as independent profit centres, a measure to enhance its revenues. These six SBUs were ground handling, Maintenance, aircraft Repair and Overhaul (MRO), cargo, passenger/airline, low-fare operations and IT services. The ground handling JV, which was to be signed with the Singaporean firm SATS, for which the Union cabinet had given its nod in February this year, is stuck. SATS is insisting that the JV be now formed with a recently floated company SATS investments private limited, in which it owns 51% stake only and there is a lack of clarity on the ownership structure of the remaining.
Similarly, the MRO with Boeing and Airbus is yet to take off the ground, with lack of clarity on ownership and revenue sharing structure with regard to Air India and Airbus joint venture. On the to-be-launched low-fare domestic operations of Air India, aviation experts and policymakers have their reservations. Not to say that low-cost is not the most favoured model in these times, but they point out that the overheads in case of Air India will retain the full service carrier character, thereby questioning the success of the model. Unless Air India finds a way to deal with that, it will be entering into yet another quagmire.
In hindsight, the merger of Air India and erstwhile Indian Airlines in 2007 may appear to be a disaster, as the much publicised gains from synergies between the two remained buried in Accenture?s (consultant to the airline and responsible for hand-holding the airline through the merger process) report only. The fact is two years into the merger, passengers still can?t book an Air India flight and an erstwhile Indian Airlines flight at the same window. This has delayed the airline?s entry into the Star Alliance, the coveted airlines? grouping that allows them to offer seamless inter-connectivity, as Jet Airways, a strong contender, waits in the wings having been told by the government to back off. The last deadline for completing the tendering process and awarding the contract was August 15, after the earlier contract with global IT giant EDS was scrapped. The airline is well past that deadline and there seem to be no signs of IT integration, as one of two bidders, airline sources revealed, failed the technical bid.
The much-hyped expansion of Air India board by bringing in independent directors by August, announced with much fanfare by the government, has not happened. The international advisory board, to aid and advise the airline, comprising international aviation experts, is nowhere near being formed. The only thing that has kicked off is hunt for a global chief operational officer, advertised through leading international dailies and magazines.
Given the current state of aviation industry, with Jet Airways and Kingfisher Airlines too bearing the brunt of global financial crisis, government should look at easing foreign direct investment norms, enabling foreign carriers to pick up stake in domestic airlines. It will pave the way for liberation of Air India too from the clutches of babudom and their neta-log, bringing in the much needed accountability and transparency in affairs of the airline. In Air India, accountability has always been a casualty, and this time too despite the massive piled-up losses to the extent of Rs 7,200 crore till March 2009, the situation is no different. While the slowdown has played its role, blaming it entirely will be foolhardy and like sweeping the real issues under the carpet. Instead of being fleeced by every subsequent government and crippled by lop-sided policy making, Air India would be much better off as Air India Inc.
?smita.aggarwal@expressindia.com