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| Air India's troubled flight |
| Business Standard / New Delhi Jul 20, 2009, 00:49 IST |
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The management cannot escape blame.
Reviving Air India is a task that has a certain amount of irony for all those involved. Civil Aviation Minister Praful Patel, Air India’s sleeping board and the airline’s management have all presided over decisions to cripple the airline, and now they have to revive it in near-impossible conditions. Media attention has focused on Mr Patel’s decision to generously give away bilateral rights to airlines from Singapore and countries in West Asia, none of which have a domestic “home” market and which therefore managed to make India their home market — to Air India’s detriment. This decision can be defended on the ground that Air India was providing poor service to the migrant workers in West Asia, and exploiting its market dominance to extract high fares. In other words, the pay-off from an “open skies” policy was the benefit to the travelling public.
However, the logic of this situation was not carried through into capacity planning, as reflected in the decision to buy Rs 55,000 crore worth of new aircraft. Neither Air India’s management nor its board chose to question this decision, which is said to have been influenced by the government to the extent that options on new aircraft were converted into firm orders. It should have been obvious that no company with total revenue of Rs 16,000 crore could service the debt acquired to finance capital investment on such a scale, especially when the airline was losing market share in its most lucrative sector.
The management is also squarely to blame for the questionable pay-out of around Rs 1,500 crore each year as a ‘productivity-linked-incentive’ bonus where base performance levels have been kept below the average performance levels already achieved. Similarly, while it may have been the minister who pushed the thoroughly ill-advised merger of Air India and Indian Airlines, the managements and boards of both airlines went along without a plan to achieve synergies from the merger. Two years later, the two parts of the merged airline don’t have an integrated IT system, and they fly on the same routes.
In his public comments, the minister has been panning the airline management, and warning that heads will roll. But his plan to appoint a more professional board has so far come to nought. In any case, it is odd that most of the chief executives in recent years have been from the civil service, a good number being people who went across from the parent ministry of civil aviation. Why didn’t Mr Patel think earlier of inducting people who knew the aviation business? Privately, airline staffers have been saying that no one could stand up to an assertive minister, and point out that the chief executive who opposed the terms of the joint venture with Singapore for ground handling was promptly replaced. That is of course a telling case, but at the end of the day the fact is that Air India has not often enough been the airline of choice for the paying passenger, except when the primary consideration is low fares or lack of seats elsewhere. The minister has to bear his part of the blame, but so does the airline management.
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