The Descent of Air India (15 page)

It is important for me to clarify my position on the hiring of expatriate pilots because people have questioned this in subsequent years. Air India was not the only airline hiring expatriate pilots; other private Indian airlines were doing the same. Besides, there was no alternative. The airline was expanding its network to new destinations and inducting new aircraft such as the B777s and B737-800s. As Air India was the only carrier in the country flying this type of aircraft, Indian pilots for B777s were not available. Air India would have paid a huge price if it had lost out on growth opportunities by not bringing in expatriate pilots at that stage.

There was also a lot written at the time about expatriate pilots being paid almost two to three times as much as an Indian pilot. This statement is as absurd as it can get. Expatriate pilots were initially being paid USD8,000–USD9,000, which later went up to USD14,000 per month, which, at the dollar rate of the time, matched an Indian commander’s salary. With respect to other pilots, their pay was no more than 10–15 per cent higher. Besides, there was no logic in comparing the salaries of commanders of B777 aircraft with a minimum of 25 years of experience with those of pilots of an A310 aircraft with five years of experience. Oranges have to be compared with oranges and apples with apples.

The system was allegedly misused by people later. For example, we were told that it was being manipulated to favour a few pilot recruitment agencies. But to use that to denounce the recruitment of expatriate pilots per se would be erroneous and negligent of the fact that Air India could not have flown its new aircraft or operated new routes without them.

For that one year, when all these decisions were taken and supported despite protests from various quarters, it seemed as if the airline’s interests were for once being given their due importance. Everything that was required to put Air India on the growth track was considered and acted upon—the order for fleet expansion was approved;AIATSL was set up to protect the ground handling business;foreign pilots were brought on board to ensure that network expansion plans were not hindered; unions were dealt with, with a firm hand; and an overall environment was created in which the management could exercise its authority without pressure and fear. The organisation was seen to be bigger than its people, but not for too long. Unfortunately, many of the decisions taken by Mr Gogoi and Mr Arora were either abandoned midway or changed in such a manner that Air India never reaped the benefits that could have accrued if these had been followed through to the end. Besides, Mr Arora was moved out too soon after being appointed to the task, and that pushed the airline back to its downward slide because the new incumbent ran the airline with a different set of priorities.

CHAPTER SIX

change of guard

AIR INDIA HAD begun to set its house in order in 2003 when J. N. Gogoi and Sunil Arora were at the helm. The two had demonstrated a willingness to take tough decisions and tackled the seemingly intractable problems of employee agitation and rising costs. They reined in the airline’s expenditure bill. The airline had a high bar for travel allowances, which was reduced, and the ex-gratia payment that Air India paid to a section of its employees every Diwali, irrespective of whether the airline was making a profit or not, was done away with.

The unions too were dealt with in a firm manner. The Indian Pilots’ Guild (IPG) had been derecognised and there was a greater acceptance of the management’s point of view by the unions. Under Mr Arora, the Air India Airport Transport Services Limited was operationalised, which was a big step forward as it would allow the airline to hire younger people, pay at market rates, enforce productive norms and ensure that its
600 crore worth of annual business with the foreign airlines was protected. By the time Mr Arora left, in December 2003, the establishment of AIATSL had been approved by the board, and the Ministry of Civil Aviation was processing the final papers. However, once Mr Gogoi and Mr Arora were moved out, Air India crept back to its old ways and the hopes that the events of the year had generated burst like a bubble.

On a personal front, even though the year had renewed hopes for the airline, I wasn’t sufficiently convinced. I had become increasingly disillusioned with the apathy that had seeped into the organisation and had applied for voluntary retirement in November 2003. I was pessimistic about its future for a number of reasons. The aviation sector had become more competitive but the management was not doing enough to help Air India meet the challenges of the emerging environment.

Sunil Arora was the managing director at the time, but by the time my application was cleared by all the departments and had made its way to his table, his transfer had been announced and a successor named. In the rightness of things, Mr Arora said that the decision regarding my application should be taken by the new chairman, V. Thulasidas.

Mr Thulasidas refused to consider my application. He rejected all the reasons that I had put forward for leaving the airline. I had said in my personal interactions that I was convinced that Air India faced a survival threat, given the way its future was being played around with by the ministry, the lack of any desire on the part of the management to improve the quality of its service and the stranglehold that the unions had on every aspect of its operations. Mr Thulasidas, however, assured me that he would take the necessary steps to remedy the situation. He convinced me that he would make Air India a great airline. It was on the basis of his persuasive arguments that I agreed to withdraw my application. I soon began to regret my decision when I realised that I had placed my faith in false promises.

Mr Thulasidas was made chairman and managing director by Rajiv Pratap Rudy, the then civil aviation minister. He took over at a time when the aviation sector was undergoing a series of changes and it was thus critical for Air India to be led by a professional who knew the business as well as understood the airline. But Mr Thulasidas was a rank outsider: the last post he had held before he joined the airline was that of the chief secretary of the state of Tripura. He was new to the aviation business and had never worked with Air India. Except for a brief period in the 1970s, when he had served as an undersecretary in the Ministry of Civil Aviation, he had not had any exposure to the sector. I am convinced that if only the ministry had paid heed to the airline’s need at the time, we would have had a different man in charge and the story of Air India would have been very different.

Without casting any aspersions on Mr Thulasidas’s capability as a bureaucrat, I may say that it was quite clear within a few months that he did not quite fit the role. His experience lay in managing a state administration, about which he would often regale us with interesting tales of how he kept the peace in a troubled state or organised a robust
bandobast
for senior ministers and politicians visiting the state. Managing an airline called for a different set of skills, especially at a time as turbulent as the one he had walked into. He never really understood the significance of what his predecessors had achieved; nor did he fully grasp the challenges that the airline faced.

He was also blasé about the revenue implications of his decisions and did not pursue the setting up of the AIATSL. I was director of the HR department during that period and found myself fighting a losing battle trying to convince him otherwise. He gave in to the Air India Employees’ Guild, which refused to allow the new recruits signed on with a six-month contract with AIATSL to enter into the airport premises. Not a day’s work was conducted at the subsidiary and at the end of their term, the employees left with their pay. Thus, what was meant to be a solution to help Air India save its ground handling business died a premature death. If the chairman and the minister had intervened at this point, we may have been able to stave off the crisis that followed. But they didn’t, and it is rather ironic that the government, in 2012, as part of the turnaround plan, directed the airline to hive off its ground handling services! AIATSL was meant to do just that. If only the subsidiary had been allowed to function, foreign airlines may not have pulled out business worth crores of rupees from Air India. The AIATSL is but one example of how things were being run. There was no acknowledgement of the problems that had begun to corrode the airline from the inside, nor did the management focus on market realities. It was as if Air India was being forced into a dark tunnel with all its lights off.

AIRCRAFT ACQUISITION

Air India had long felt the need to expand its fleet of aircraft. Under Sunil Arora, the purchase of 28 aircraft comprising ten long-haul and 18 short-haul planes was approved. He recognised the compulsions of the market and was convinced that despite the burden that the acquisition would place on the airline’s finances, the expenditure was necessary.

When Mr Thulasidas took over as chairman, he more than doubled the order to 68, with 50 long-haul and 18 short-haul aircraft. The price that Air India would have to pay for the expansion was an astronomical
40, 000 crore. Why was the order increased? And was Air India ready to bear such a huge burden? There were no answers forthcoming at the time, and even today, despite the scrutiny that the decision has been put through, it is hard to find a rationale for this change in the size of the order.

An order of this magnitude would have been justified had Air India had the requisite financial muscle, which was not the case. It would also have been acceptable if the airline had been confident that it could generate sufficient revenue from the deployment of the new aircraft. Going by past experience, this, however, seemed unlikely.

Air India had, during the period 1993–96, inducted six B747-400 planes at a cost of
3,500 crore, which resulted in huge losses in subsequent years. The order that was being proposed in 2005 was of a much larger magnitude, and there was nothing to indicate that the airline had learnt its lessons. Not only was the budgeted expenditure several times larger than the previous one, but Air India was also operating in a different environment. It had to deal with increasing competition from the private airlines, in addition to the foreign airlines which were rapidly inceasing capacity on India routes.

None of the above considerations played a role in determining the size of the aircraft order. It was clear that little thought was being given to the airline’s ability to service the debt that was to be incurred for the new purchases. There was also no debate or discussion within the airline on how the purchases would impact the airline’s financial health. The management went into a cover-up mode. As a result, the aircraft acquisition deal became the proverbial elephant in the room. We knew the problem existed but didn’t bring it up at our meetings. Thus, there was no clarity on the extent of damage this would inflict on the airline, or how one could remedy the situation.

Even so, I believed that if the management had worked towards shoring up its revenues from the new acquisitions, the financial repercussions could have been contained to an extent. To ensure that the new aircraft paid for themselves, Air India should have focused on improving its product and backed this up with aggressive marketing. This would have brought passengers back and allowed tickets to be priced at a premium. The new leadership team, however, did nothing in this direction. The chairman, who should have led the charge, was more interested in departmental matters. For instance, instead of working out ways in which the airline could provide better service, he involved himself in minutiae, such as choosing seats for the new aircraft, the in-flight entertainment system, and buying Pierre Cardin nightwear for passengers. He would visit Air India’s vendors, who were spread out all over the world, in his search for the best deal for seats or a better entertainment system. While this was undoubtedly necessary and an important part of an airline’s service offering, it was not a part of the chairman’s list of things to do.