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| Anjuli Bhargava: Only one way to go |
| Anjuli Bhargava / New Delhi Jan 30, 2009, 00:15 IST |
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I recently asked a senior Jet Airways official what his Chairman Naresh Goyal would do if one of his overseas flights was delayed by 48 hours and passengers had a harrowing time getting to their destination? He would fire those responsible, came the unhesitating reply.
I don’t know a single politician who wouldn’t publicly agree with this view. But unless the government allows Air India (the combination of old Indian Airlines and Air India) to freely ‘hire and fire’, there is a good chance our children will not even be aware that this huge public behemoth ever existed.
Take a look at some of the facts. The last available loss numbers for the airline were $450 million approximately, but this year’s losses are expected to be closer to $600-700 million. Accumulated losses are pretty impressive too. A senior banker in Mumbai told me that, for the first time, banks had become wary of lending even to Air India, which is otherwise considered as good as government paper.
What is even more worrying is that in the case of Air India (not including the old Indian Airlines), revenues from operations (passengers, cargo, etc) have been falling steadily. All the increase in revenue can primarily be attributed to non-operating revenues from sources such as ground handling, charters, royalty and so on. Sources say that there has been a 7.2 per cent fall in the operating revenues in 2006-07 — as with most government-run bodies, one has to rely on ancient data — over the previous year, whereas revenues from non-operating sources like charters, pool and block seat arrangements and royalty were up 14 per cent.
Over the years, large sections of employees have been rewarded with no link to performance. A retired Air India official said that during the previous chairman and managing director’s tenure “contracts were signed with unions far in excess of the paying capacity of the airline”.
But what’s worse is that the new CMD Raghu Menon seems blissfully unaware or unconcerned of what a hazard his mini-army of employees is and can become. At a meeting, he told me that his 31,000-plus employees were not a concern for him at the moment and neither was his wage bill — which could well end up being as big as the GDP of a small-sized country in the near future. He was quite clear that privatisation was not on the agenda and that firing non-performing employees wasn’t the solution. “I don’t believe in firing employees”, he told me, saying that he believed in “managing employees”.
We have all already seen how far “managing employees” has taken the airline in the last 30 years. Aircraft being late, not by hours but even days, was once almost the norm. One click on the web and reams of complaints and experiences cursing the airline would pop up, with many passengers singling it out as the one international airline they would not fly. Even the maintenance of aircraft has been poor in an airline which has some of the best engineers.
The integration of the two carriers hasn’t been all that smooth either. Erstwhile Indian Airline sources feel that they have unnecessarily been saddled with all of Air India’s problems which seem more serious than theirs and that this is something of an “albatross around their necks”. Unfortunately, the present CMD — who is grappling with problems which are not of his making — refuses to acknowledge this, arguing that the merger has been fully-accepted by all employees.
A few months ago — before Menon took over — the airline’s previous CMD had written to the government asking for a Rs 1,000 crore equity infusion on the grounds that “integration costs have arisen”. The last time around, the request was turned down as the ministry of civil aviation felt that, at the time of the merger, the Cabinet had not been apprised of this. Secondly, ministry sources were of the view that the financial crunch the airline was facing was more due to high fuel prices, and a substantial fall in the revenues and loads of both the carriers rather than due to any integration costs. However, given today’s reality, the government is likely to cough up the money, rather than see the airline shut its doors.
But unless there is a fundamental change in the way the airline functions, I suspect this may just be money down the drain. Some extent — actually a pretty huge extent — of private equity has to be invested into the merged carrier for it to survive in today’s aviation environment.
Private airlines happily outsource many of the functions that Air India insists on doing itself. Outsourcing some of these could bring down the employee wage bill and employee rewards could be strictly linked to performance, a concept alien to the airline today.
One small example should highlight the way Air India functions. Air India partially hosted the October 2008 Air Show in Hyderabad, spending fairly substantial sums of money it could ill afford at the time, primarily at the behest of the ministry. Which private airline chief in his right mind would agree to that?
anjulibhargava@gmail.com
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