The Descent of Air India (11 page)

It is important to understand that the government had the right to appoint a bureaucrat to the position and that the problem was not that a bureaucrat was being chosen for the task at hand. In fact, the airline has had some of the best bureaucrats working on its behalf in the early years. Air India had an ICS officer, B. R. Patel, as its chief executive from September 1955 to November 1966. He not only provided stability to the airline but also gave his deputies great latitude, and under his leadership, both S. K. Kooka, commercial director, and A. F. Dubash, planning director, built two great teams that helped them to guide the airline in its most formative years. It was an era in which the bureaucrats deputed to Air India displayed total commitment to the airline and could make an impact because they were a class apart and were not moved around at short notice as they were in the later years.

It is also difficult to comprehend, however, why the government, despite the disastrous turn of events at Air India has not exercised greater caution in the selection of the incumbent. The airline business was changing. Policies were being amended to create a more competitive environment and it should have been obvious to the owners of Air India that the set of core competences needed to lead the organisation was different from that required earlier. Additionally, within the bureaucracy, the government continued to repose its faith on officers whose exposure to the airline industry and to Air India was minimal but who were known to be loyal to the establishment. Thus, even if a few bureaucrats who were made managing directors did try and make a difference, they were prematurely transferred.

The severity of the situation is all the more glaring if one looks at the way the last five chairmen and managing directors were appointed. It shows how the process was subverted to bring in people at the whims of the political establishment.

Rajiv Pratap Rudy, the minister for civil aviation in 2003, appointed V. Thulasidas, who was then Chief Secretary, Tripura, as the chairman in December 2003. Mr Thulasidas’s candidature was said to have been recommended by R. K. Singh, then a director in the Ministry of Civil Aviation and allegedly a friend of the minister and a cadre-mate of Mr Thulasidas.

Likewise, in May 2009 Praful Patel appointed Arvind Jadhav, an IAS officer from the Karnataka cadre, as the chairman of Air India. Mr Jadhav had applied in 2008, but his candidature had been rejected by the Appointments Committee of the Cabinet on the grounds that he lacked domain knowledge since he had never worked in the Ministry of Civil Aviation. Mr Patel, however, paid no heed to the observations of the Appointments Committee and brought in Mr Jadhav to replace Raghu Menon. Speaking to the media after Mr Menon was moved, Mr Patel said that action was necessitated because of non-performance. The real story was that Mr Menon, despite toeing the ministry’s line on several controversial decisions such as aircraft acquisition, had fallen out of favour. In its bid to replace Mr Menon expeditiously, the government first appointed E. K. Bharat Bhushan for a week, and then brought in Arvind Jadhav, overlooking his lack of knowledge of the sector. It was only after Rajiv Pratap Rudy, in his capacity as an opposition party MP, sought all the documents relating to Mr Jadhav’s appointment under the Right to Information Act that the flaws in his appointment came to light. And the government hastily replaced Mr Jadhav with Rohit Nandan, who was then a joint secretary in the ministry, without going through the Public Enterprises Selection Board. What are we to conclude from these instances but that the selection process is nothing but a farce?

Interestingly, if we apply the condition of domain knowledge as an eligibility requirement for the post of chairman, the appointment of V. Thulasidas too comes into question. Mr Thulasidas had worked in the Civil Aviation Ministry as an under-secretary nearly three decades before he was appointed chairman. At that time, Air India enjoyed a semi-monopolistic status and the aviation sector worked according to a very different set of rules. Before he was made the chairman, his last assignment was as chief secretary in the state of Tripura. How could this have been considered to be sufficient experience for running an airline? Running the administrative machinery in a state and managing a commercial entity such as Air India call for vastly different skill sets!

Given that the ministers appropriated the right to appoint and remove the chairmen at will in a manner that was neither transparent nor consistent, the people who came to the post were generally more beholden to the appointing individual than the organisation. Thus, they would tailor their tenure to suit the needs of the minister rather than those of Air India.

The appointment of IAS officers with no serious or permanent stake in the airline has led to the abandonment of the airline’s interests. They offered little resistance when the minister either subtly or openly advised the withdrawal of flights from certain sectors to facilitate private airlines or when the issue of vantage position for lounges and check-in counters at airports came in and airlines close to the minister got preference and Air India was relegated to the less visible areas. None protested but many employees privately complained that they felt disillusioned at the way the airline was being given step-motherly treatment. This discrimination was also evident when it came to allocating slots and landing bays at major airports. The best bay locations were reserved for private airlines, and foreign airlines were given access to key cities. There was none to place Air India’s point of view to the people concerned.

Most IAS incumbents have preferred to work with a small coterie of officers who did not allow the chairman to meet others while letting the chairman believe that he was doing a great job. This was disastrous from the airline’s perspective because the CEOs believed that they had functioned admirably while the true state of the airline that emerged only after they had left presented a different reality. Every chairman left Air India a little worse than he had found it when he had joined, but when in office, they were made to believe that the airline was at its peak level of performance. Intriguingly, most CEOs relied on the same set of qualities in their trusted people: unflinching loyalty, no outspokenness, obedience without discussion or dissent and the ability to work without questioning the merits of their decisions.

The constitution of the Air India board, too, became an arena for constant experimentation. It was routinely filled with luminaries from the corporate sector and political heavyweights, but few managed to make an impact. The fault perhaps lay with the manner in which the appointments were made—some were bestowed the position as a favour while some were brought in to give the board some respectability. Thus, the members were never really chosen for their ability to steer the organisation out of turbulent weather but rather as a matter of political expediency. Numerous well known individuals from the private sector were inducted into the board from time to time—Ratan Tata, Deepak Parekh, Sanjiv Goenka, Suresh Keswani, n. Vaghul, Anand Mahindra and Harsh Neotia from the corporate world; Ajit Kerkar and Inder Sharma from the hospitality industry; Pallam Raju, R. P. Panika and Vidya Stokes from the political world; Jaya Bachchan from Bollywood; Air Chief Marshal I. H. Latif and Air Chief Marshal F. H. Major from the Indian Air Force being among them. While some had little or no experience of the airline industry, those who had corporate sector experience did not—or were not allowed to—play the role expected of them. The buck stopped with the chairmen and the managing directors who, as we have seen, were subject to pulls and pressures from the political and bureaucratic establishments.

I have often wondered what made proficient and highly regarded professionals take on an assignment where they would have little or no impact, but I have yet to find a clear answer. Perhaps many were attracted to the position on account of the glamour attached to Air India or perhaps they were unable to refuse a political patron. I was aware that it was a highly coveted position among some members of the industry and knew of a few senior executives from the private sector having approached politicians for an appointment to the board of Air India. Whatever the real reason, the result was that the airline suffered on account of their complicity by silence or active connivance. If the government’s intention was ever to infuse professionalism through the induction of these individuals, it was not fulfilled. There was no attempt to change or bring about greater accountability in the board members even when it was apparent to all concerned that they could not contribute or guide the destiny of the company, ensure good corporate governance or prevent the mala fide decisions being forced through.

I have always maintained that Air India would have to look more innovatively for professional expertise rather than rely on failed experiments. And when Praful Patel, as the minister of civil aviation, once again appointed private sector stalwarts such as Anand Mahindra, Amit Mitra, Harsh Neotia and Air Chief Marshal F. H. Major in March 2010 to the Board, I had no hesitation in sticking my neck out to forecast that the experiment would not succeed. Writing in the
DNA
newspaper on 18 March 2010, I had said that ‘As the new members have been appointed at a time when Air India’s ability to survive is being questioned, it is only to be hoped that they will play a role, notwithstanding the infirmities in the system, which can help save the national carrier.’ Further, ‘the Board cannot have members with little or no understanding of the airline industry’s functioning and the ground realities that exist in Air India. It is one thing to take decisions that are deemed critical and imperative and another thing to ensure the implementation of such decisions.’ My apprehensions were borne out when some members quit within a year of their appointment while others played a role of virtually no significance. The loser, in the end, was Air India, as yet another opportunity was frittered away by the people who had been entrusted with its future.

Praful Patel, during his tenure, also brought in an expatriate as the airline’s chief operating officer (COO). This was soon after Arvind Jadhav, then chairman and managing director, exposed the horrific financial situation of Air India in June 2009. He showed that the airline was deep in the red and that it had overshot its credit limit and had no funds with which to pay its employees and vendors. The Prime Minister’s Office took note and Praful Patel announced the appointment of Gustav Baldauf after the selection process, which had taken almost a year. But that experiment too failed because of the farce that surrounded the appointment and his subsequent tenure in the airline. The problem lay with the choice of Mr Baldauf. While he was a pilot of some repute and had worked with Jet Airways for a couple of years, he had never held a key management post overseeing the many aspects of an airline’s functioning. Besides, he had never operated in a government environment and thus had little or no idea of the way things worked, especially within the government. I was prompted yet again to stick my neck out. In an article in the
Hindustan Times
, 12 May 2010, I said that the experiment would not succeed because Mr Baldauf neither had the experience of turning around a company nor the ability to deal with the Indian bureaucracy, which revels in backseat driving. Even more depressing was the fact that most of the selection committee members who had chosen the incumbent from the short-listed five candidates had little or no understanding of Air India’s mammoth and multifarious problems. Those who had chosen him to lead the airline should have known that the airline’s labyrinthine structure would pose a big hurdle for a person not well versed with the ways of the industry and the country. Mr Baldauf lasted all of eight months; he was removed from the post within a month after Praful Patel was moved from the ministry. Speaking to the media after his removal, he complained that he had been unable to work because of government interference. If we take Mr Baldauf’s comment at face value, the question we are forced to ask is whether these stalwarts failed Air India or whether Air India failed them. I would plump for the latter because in my experience, the bureaucracy has time and again stifled initiative and encouraged mediocrity. Also, as part of the board of Air India, the bureaucrat-members have dominated the proceedings, placing impediments in the way of professional members and frustrating all attempts to bring about change.

I had pointedly asked Amit Mitra—then a board member and now the finance minister in West Bengal—in January 2011, when I accidentally bumped into him at the Delhi airport, why the Board of Directors of Air India was letting down the airline in its critical phase. His response was: ‘We are not given any information by the airline, even when asked.’ He, along with a team of other professionals on the Air India Board, had in fact met T. K. A. Nair in the Prime Minister’s Office on 1 November 2010 to highlight that things weren’t moving according to plan within Air India and about the ‘lackadaisical attitude’ of the top management to the slow progress of a turnaround plan for the loss-making airline. But their protest did not change anything.

Why, I often wondered, did none of the board members protest in public? Or oppose decisions in the board meetings? Each individual must have had his or her reasons. However, the finest example of a veteran professional who was an independent board member was N. Vaghul, former chairman of ICICI Bank. But he, too, was unable to make a difference. Acknowledged as a financial wizard, he was on the board for more than a decade and part of several major decisions. He was also a signatory to the annual accounts, which, as we later discovered, declared losses for several years to be lower than the actual amount. We shall go into the financial mismanagement at Air India in greater detail in the following chapters where the extent of damage will be more evident.

Why did the board and the experts not protest against the patently unfair and wrong decisions? Unlike the bureaucracy, the corporate representatives were not under obligation to do the government’s bidding and it may be an interesting case study to see how the Air India Board, despite having eminent professionals, failed to function in a government set-up. There were some exceptions and a few IAS members on the board did raise questions about the flagrant flouting of rules. V. Subramanian, an additional secretary and financial advisor in the Ministry of Civil Aviation, protested, but he was moved out within 24 hours of his views being made public. Mr Subramanian had questioned the fleet acquisition proposal when it was being discussed in October 2004. He asked where the business plan and route profitability was to justify the purchase of aircraft in the proposed numbers since the decision would have severe financial implications for the airline. Sunil Arora, when he was the chairman of Indian Airlines, and, thereby, a member of the Air India Board, also asked relevant questions on aircraft acquisition. He drew the attention of the cabinet secretary to the pressure being exerted on the board. But his voice was ignored and he has had to face the ire of his seniors for the stand he had taken. E. K. Bharat Bhushan was another IAS member on the board who raised valid points to prevent mala fide decisions from being taken or sought details of issues where loss had been caused to the airline. His request for a vigilance enquiry on leasing of aircraft was not pursued once he moved out because he was entrusted with the additional charge of Director General of Civil Aviation (DGCA). Was the additional responsibility assigned with the intention of silencing him? Even though the issue of enquiring into the leasing of aircraft, which caused a loss of several thousand crore rupees, was a decision taken by the Air India Board, no other member ever asked as to what happened to the vigilance enquiry once Mr Bhushan quit.