Opposition to JV with SATS cost Air India chief his job
Surajeet Das Gupta & Anirban Chowdhury / New Delhi Apr 26, 2009, 02:30 IST
Arvind Jadhav likely to replace Raghu Menon as CMD.
With Arvind Jadhav, principal secretary, in the department of infrastructure development of the Karnataka government, emerging as the frontrunner in the race to replace Raghu Menon as the chairman and managing director of the state-owned National Aviation Company of India Ltd (Nacil), which runs Air India, informed sources said Menon lost the coveted job because of his opposition to the airline’s proposed joint venture with Singapore Airport Terminal Services (SATS) for ground handling.
According to the joint venture agreement, Nacil will have a 51 per cent stake, while the rest will be owned by SATS. The ground handling business of Nacil and almost 6,000 employees will be transferred to the joint venture company.
Menon had also come under attack from the ministry of civil aviation for his failure to integrate Air-India and Indian Airlines smoothly, as well as his inability to improve the financials of the company and provide a business plan for the coming year.
Even while Menon was on leave till April 30 (which he has extended now), EK Bharat Bhushan, a financial advisor in the ministry, was given the additional charge of the airline on April 23. That was also the time when the ministry decided to look for Menon’s successor. A list of names was sent by Cabinet Secretary KM Chandasekhar yesterday to the Appointment Committee of the Cabinet for replacing Menon.
Sources close to the deal said the Nacil brass led by Menon opposed the joint venture on three key counts. One, the ground handling business was lucrative for Nacil as it provided revenue of over Rs 1,000 crore and profit of around Rs 200 crore. It should therefore not be given to SATS on a platter.
Two, Nacil would have to pay the joint venture company 20 per cent over the cost for ground handling services. As Nacil operates over 1,000 flights a week, this payment would be much more than the dividends it would get from the joint venture. And three, transferring 6,000 employees to the joint venture would make their future uncertain.
Civil aviation bureaucrats, on their part, did not agree with these arguments. They pointed out that SATS was chosen through a transparent process and the joint venture proposal was given the go-ahead by the Union Cabinet. “SATS was a logical choice as Nacil already has a joint venture with it for ground handling in Hyderabad and Bangalore, which would now be extended throughout India,” said an official. He added that Menon’s fear of loss of control had been addressed as Nacil will have a 51 per cent majority stake in the joint venture.
Officials also confirmed that Menon was under scrutiny for his inability to integrate Air-India and Indian Airlines. (The two airlines were merged to form Nacil in 2007). “The integration was in very bad shape. There has been a huge delay in the integration of the information technology systems, which was important for it to become a member of the Star Alliance,” said a government source. He also pointed out that even now Nacil operates two separate reservation platforms, through the common reservation system was supposed to be up and running in six months.
The sources also said that Menon even delayed Nacil’s business plan that was supposed to be sent to the ministry of finance. The ministry had asked Nacil to give a detailed business plan including its future expansion plans before approving the soft loan of Rs 1,000 crore and fresh equity infusion into the company. The business plan that Nacil had given, the sources said, was unsatisfactory and a complete report has not yet been submitted.
I would like to bring some fact about Air India(Not IA)
1.Dhaka/Delhi sector shut down just before Jet Airway start this flight from Dhaka.
2.Why low capacity aircraft is used on Delhi/Dubai sector which was most profitable sector of AirIndia. Emirats has started three flights/day .Previously AI never gave this sector to IA then why this sector is given low priority.
3.Like this DEL/SIN,DEL/BKK,DEL/FRA/LAX sector were running with high capacity are shut down or using low capacity aircraft ??????? for whom to benifited....
4.Merger of AirIndia & Indian Airlines the perfect example to make sick these two PSU.
Why the profit centre are given to the others? About 75% 0f profit comes from Ground Handling.Govt.ready to give the bail out package but not giving equipment and manpower.AirIndia has trained and most expericence staff in India & middle east.
After the merger it looks like that one leg of AI & one leg IA tied togather and said run....
The minister along with his babus want to sell the profit making centre for peanuts as they are benefitted by it .they have already killed both Air india and Indian Airlines by merging the two.The unions should oppose the move otherwise the minister will sell the airline as his pant pockets have become empty after electionsand the same has to be filled by these methods.
Dear Editor,
It is good Business India have uncovered story, why Air india is in Losses and how Hnest CMd is removed. Please uncover whole episode. Jasy
It is shameful when Air India is in losses, Minsitry of Civil aviation is selling one of Air India Profits Centres to Aviation Mafia for their own gains. Mr Menon showed courage and loyality to protect interest of Air India. A Complete probe should be done under any sitting Judge. RDsingh Ex Air Indian......Mr Menon should awarded award not beinding in fornt of Avation Mafia.
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