The mess at Air-India

Aviation ministry seems to micro-manage Air-India, and Mr Raghu Menon is resisting such interference

Former ONGC Chairman Subir Raha was not known for mincing his words. Yet, he surprised many with his outspokenness at ONGC’s annual general meeting three years back. Companies are not departments, Mr Raha declared; but in the government’s scheme of things, the distinction between a state-owned enterprise and a department often gets diffused. Though Mr Raha did not name anybody, the speech came in the midst of the then Petroleum Minister Mani Shankar Aiyar’s attempt to foist extra government nominees on the boards of oil companies. It was no surprise that Mr Raha did not last very long after that speech.

In contrast, Raghu Menon is not known for voicing any strong opinion in public. Still, Mr Menon seems about to lose his job as the chairman of the National Aviation Company of India, barely a year after taking over. No reason has been given for his tenure being cut short, but as a report in this paper said, there seem to be differences of opinion between the airline management and the civil aviation ministry on more than one issue. It is no secret that the ministry has sought to micro-manage the post-merger Air-India, and that Mr Menon has been resisting such interference in a way that his predecessor did not. It might be argued that since Mr Menon was in the ministry before he moved over to the airline, he should have known the lie of the land, but that is neither here nor there. The ministry in turn is said to be unhappy with Mr Menon on key performance parameters, including the lack of progress on integrating the operations of Air India with Indian, following their merger.

In the larger scheme of things, whether Mr Menon stays or is succeeded by another bureaucrat is not of great import. Mr Menon is not an acknowledged management expert with a track record in aviation that would make his departure a crisis issue. Admittedly, the abrupt departure of any chief executive will be disorienting for a company’s management, and a new incumbent will take time to learn the basics, but the fact is that Air-India has got used to chief executives coming and going without any apparent logic (usually an indicator that the real reasons cannot be disclosed). What should cause worry, therefore, is the evidence that, if corrective action is not taken quickly, the airline will one day cease to fly. Banks have been refusing credit, as debt has piled up. Losses have mounted to stratospheric levels, and are estimated to have crossed Rs 3,000 crore — three times the combined losses of Air India and Indian at the time of the merger. The ministry has so failed to do what is required in such a situation (provide additional equity, and insist on a time-bound revival plan), while apparently interfering in all manner of deals that the airline has been entering into with private parties. The Board for Reconstruction of Public Sector Enterprises publicly complained recently that the minister in charge, Praful Patel, had not responded to its request to examine the financials of Nacil. Mr Patel has maintained in the past that he is the minister for aviation and not for Air-India, which is true enough. But he happens to represent the airline’s shareholder, and in that role has presided over a rapidly deteriorating situation for five long years.