The Descent of Air India (45 page)

Air India, under the circumstances, had perforce to tie up with Singapore Airport Terminal Services Ltd (SATS), Singapore. Once again, the experience has been unfavourable for Air India, with SATS having been delivered the existing business by Air India on a platter. With virtually no investment, the Air India–SATS tie-up has now been extended to a few other airports, thus edging out Air India’s revenue earning potential for all times to come. What is now left to be hived off under the turnaround plan? Another significant aspect of the government’s ground handling policy was that only three companies could provide services to airlines. Airlines were not permitted to use their own employees for these services. While initially the government kept deferring the implementation date on a six-month basis at the request of the airlines, it has now decided to allow individual airlines to handle their own flights. No one need complain except that Air India, instead of being a market leader in ground handling, will now be amongst the few carriers not exclusively handling its own flights, which will be catered to by the AI–SATS joint venture. Once again, a policy that was supposed to benefit Air India has in fact harmed its interests.

DELAY IN MONETISING ASSETS, INCLUDING AIR INDIA BUILDING

The turnaround plan considers revenues under two heads: operating and non-operating revenue. The latter includes income from monetisation of assets. The airline is expected to generate revenues worth
5,000 crore over a ten year period starting 2012 in this fashion. Air India has land and buildings in multiple locations in India and abroad. The annual report for 2008–09 reveals that land held by Air India was valued at
705 crore for freehold land and
6,353 crore for leasehold land. Moreover, AI had building assets valued at
1,535 crore at the end of the financial year 2009. Air India, having been in the airline business, knew very well that building premises were akin to aircraft seats. Just like an aircraft seat is of zero value once the flight has taken off, the rental income from building premises is also a dead loss once the month has gone by. AI has lost a few hundred crore of rupees for delaying the renting out of the AI building and other premises. Incidentally, less than one-fifth of the total area of the building was used when Air India was operating out of Mumbai and even less after it shifted headquarters to New Delhi. Most floors are lying vacant as tenants were asked to leave several years ago due to the fact that as rent, they were paying a pittance that did not even cover air-conditioning costs. Even after five years of pathetic finances, the board, in 2012, only took a decision for the appointment of a consultant to advise the management as to whether the building should be sold or rented out. Air India finally issued a public notice in October 2012 inviting interested companies to submit bids for taking space on rent, which elicited poor response, forcing the airline to repeat the exercise three months later. The airline further sought a high rent of
350 per square foot, much higher than the prevalent rate in Nariman Point at the time. It also stipulated through its advertisements that a tenant would have to rent a minimum space of a floor, but when it found no takers, it reduced the same to half a floor. It seems illogical that an airline that needed to maximise revenues would set so many hurdles in its path. However, as there is no accountability, no one can be asked as to why this rental income was sacrificed.

With the core business of flying passengers and ferrying cargo not bringing in enough revenue, and the earnings from providing ground handling services to foreign airlines at various airports given a go-by, the minister Ajit Singh has now spoken about putting Air India’s art collection, valued at several hundred crores, on sale. Going by the airline’s past behaviour, where off-the-cuff remarks of ministers were deemed as orders, one wonders if Air India’s management will put on sale the art collection because the honourable minister has opined that it should be so or preserve the heritage and concentrate on revenue generation from its main core businesses.

NO ONE TO BLAME

While the damage done by those heading the ministry and the airline is evident even if they can’t be held accountable, what is not as clear is the role of other individuals involved in the decision-making process. There were many in Air India who supported the chairman’s decisions, even when they knew it to be faulty. They would even laud his vision and approach, earning promotions and perks in return for their praise. I believe they are all responsible for the state Air India is in today. Similarly, those who were part of the governmental agencies and responsible for acquiescing to the minister’s wishes with haste are all to blame for the damage that these decisions have inflicted upon the airline.

What also cannot be ignored is the fact that almost all the executives of Air India associated with most of the aforementioned decisions ended up being rewarded either by way of post-retirement jobs or by way of promotions, if still in service. This included those who helped purchase seats for B777 aircraft, the person who formulated proposals for the leasing of aircraft, the executive who justified aircraft purchases by concocting unattainable load factors and revenues based on imaginary fares, the executive who failed to correct systemic weaknesses in work practices and signed wage agreements when the airline couldn’t afford them, the official who bought merchandise at exorbitant rates, the finance executive who facilitated board approvals of various destructive proposals, those who manipulated the accounts to paint a rosier picture and the executive who planned Frankfurt as a hub. One can simply go on and on.

And I am reminded of the following quote, which so aptly sums up the current situation:

When you know that in order to produce, you need to obtain permission from men who produce nothing, when you see that money is flowing to those who deal not in goods but in favours, when you see that men get rich more easily by graft rather than by work, and your laws no longer protect you against them but protect them against you, you know that your society is doomed. (
Atlas Shrugged
, by Ayn Rand)

How well this applies to not just Air India but to all of India today! We know who killed Air India’s revival, but we don’t know why. The only question that needs an answer is this: should we say, ‘Air India, RIP?’

CHAPTER FOURTEEN

looking into the crystal ball

I WAS AIR INDIA’S public face for more than two decades. In the course of my duties, I interacted with people from diverse strata of society, and while the airline evoked mixed reactions over its quality of service and performance, I never ceased to be pleasantly surprised by the deep connection with the brand that most Indian fliers had. Almost everybody I met spoke about the airline with varying degrees of fondness while bemoaning its waning dominion over the skies.

Intriguingly, Air India’s decline from the heights it once commanded has been the concern of everyone except those who need to set matters right. Many have even begun to use the airline’s example to describe the declining state of different government-owned companies by classifying the phenomenon as ‘going the Air India way’. Mr Dinesh Trivedi, a former railway minister, said so in case of the Indian Railways after his budget was stalled, and the same has been said of the Shipping Corporation of India and BSNL. Air India’s fate seems to have become symbolic of all that’s wrong.

Over the years, as my disillusionment with the airline grew, I felt that I was in some way answerable to all those who had reposed their faith in the airline. I hope that, to an extent, this book has been able to provide all those who have asked me ‘
What went wrong
?’ with some understanding of what led to Air India’s decline. But there is a question that I still have to address, and that is: is there a future for Air India?

To answer that, let us look at what is being done to pull the airline out of its current imbroglio.

MONEY, MONEY, MONEY…

Air India’s pathetic financial situation was first made public by Arvind Jadhav in July 2009. He delayed the payment of salaries to employees by a couple of weeks to give the airline’s state of affairs a dramatic twist, and the crisis was blown into the open.

The government was forced to act, and it did so swiftly, but instead of tackling the core problem—the lack of a strategic and operational direction within the airline—it decided to focus on a financial package. This is no solution at all, and if I had to use an analogy, I would say that it is like applying a fresh coat of paint to a crumbling house. We are being misled into believing that the airline’s survival is but a mere matter of infusion of funds. The government and, in fact, all those involved with the decision are thereby oversimplifying a hugely complex issue.

The reality is that Air India’s survival hangs on several pegs, most notably the induction of professional management with an effective leadership, a sound financial package that does not come with political interference in day-to-day operations, unions allowing changes in work conditions and pay packages, removal of all hurdles in the way of the merger and, of course, commitment, faith and prayer. To be able to fly again, Air India has to find the will to get back on its wings.