The Descent of Air India (46 page)

If we look at the way the airline has performed and how the management reacted during the six-year period spanning 2007–13, the prognosis is not very hopeful. The management has been indifferent and the political influence has reached its zenith, making it impossible for any decision to be taken without ministerial approval. In fact, if we consider the period since 2005—a time for tough decisions as Air India found itself staring at an unfolding financial crisis—we see that the leadership team went about business as usual. At no stage was there a sincere and sustained effort to improve the airline’s performance on any of the key performance indicators—market share, load factor, on-time performance, network expansion and aircraft utilisation. Nor was there any attempt at winning over and reassuring the travelling public.

While the last five years have been difficult for the aviation industry as a whole due to the global economic downturn, an unabated growth in capacity and a growing number of Indian carriers as international operators, Air India has performed worse than airlines that have far less experience. Even SpiceJet, which had less than 10 per cent of the market share six years ago, has caught up with Air India. The national carrier is oscillating between the third and fourth position among five Indian airlines, not counting Kingfisher, which used to dominate the market but has since fallen by the wayside for a host of reasons. One reason for why these airlines have been able to overtake the oldest carrier of the country is their focus on survival and profitability. And that has come about on account of a professional management.

We saw Air India flourish when it was managed by a visionary leader and a dedicated and experienced management in the 1960s and the 1970s. Ironically, when the market conditions are far more hostile and Air India needs a set of experts at the helm, it has been saddled by a bevy of bureaucrats who are unfamiliar with the aviation sector and have not been in their posts long enough to bring about effective change. Worse still, it appears as though neither the government nor the management and the employees have realised the depths to which the airline has sunk. They are still focusing on peripheral and cosmetic changes to steer the airline out of the clouds. This is symptomatic of the manner in which the airline’s problems have been addressed over the years: in haste, with an eye on short-term gains and without understanding the multiple issues that have led to the airline’s decline. For instance, on 12 September 2012, while welcoming the first B787 Dreamliner aircraft in the fleet, Ajit Singh, the civil aviation minister, said, ‘The aircraft will help restore the glory of the Maharajah.’ On 19 June 2013, Rohit Nandan reiterated the same in his message to employees. He said, ‘The Dreamliner returns to the skies and with it our dreams are coming true as they bring Air India the strength to surge ahead and surpass the competition. The Boeing 787 with lower fuel and operating costs are at the centre of the plan to revive our fortunes and improve our performance.’ He was speaking after all the Dreamliners with all the airlines the world over, which had been grounded by the FAA due to safety concerns, were pressed back into service. Evidently, the people in charge are cognizant of the need for efficient aircraft, but inexplicably, they are overlooking the need to improve efficiency in every other sphere of the airline’s operation. The naïve belief that the airline can be turned around through the mere induction of a type of aircraft would be amusing if the situation were not so grim.

While the need was for Air India to be managed professionally, the government has been steadily increasing its stranglehold on the airline. Even the most routine decisions are being taken by the political establishment. It is Mr Singh who asked for a plan on increasing the market share. It is he again who has asked the management to ensure that the pilots and the cabin crew fly as per the guidelines of the directorate general of civil aviation (DGCA) on flight and duty-time limitations. It is he who decided on the strategy that the airline must adopt to deal with the striking IPG pilots, and it is his suggestion that Air India should set up a hub in southern India, and so on. Why has the management allowed its functions to be taken over? Or is it that the minister has no faith in the men that the ministry has chosen to lead the airline? Either way, this does not bode well for Air India.

To come back to the question of whether Air India can pull itself out of the crisis, my view is that it can be done if and only if the management reclaims its decision-making powers. For that, the airline needs to be led by a different set of people because those who have managed its business since 2004 have done little more than acquiesce to the ministers’ wishes. Air India needs to focus on bringing its expenditure bills down, improving its service and thereby revenues and treating the airline like the business it used to be—not the fiefdom of a few—and that will be impossible without a team of aviation specialists and management experts at the top. Merely throwing money at the problem will not make it disappear.

HALF-BAKED MEASURES

The government picked and chose the recommendations made by the Air India management and those from the consultants to bring about the airline’s revival. It accepted the request on financial assistance by way of equity infusion, restructuring of debt to include a moratorium on interest payment for a year and a moratorium on repayment of loans for a couple of years, and allowing the airline to raise funds through the issue of bonds. But it did not accept the other critical suggestions: allowing the airline to defer or cancel part of the order for new B787 aircraft, restructuring the top management team, regulating the capacity of foreign airlines in India and appointing independent directors from finance, IT, hospitality, legal and economic disciplines on the board.

Consider the refusal to back down on taking delivery of the aircraft. The airline has been forced to take in the entire lot of 27 B787 aircraft ordered in 2005, even though Qantas, which is much better placed financially, has deferred deliveries by two years. Why, if the objective was to revive the airline, was its plea unheard? And if the new aircraft fail to deliver the results or fails to, as the minister has been quoted in the media, ‘restore the airline to its former glory’, will anyone be held accountable? Also, the financial package was nothing but an old plan to infuse equity into the airline that had been recommended by accenture in 2006 and a request from Air India’s management for financial assistance in 2009 repackaged under a new name. Why did the government go slow? Minister Ajit Singh, when he announced the plan for Air India’s revival, said that the government funding did not come for free. He said that Air India would have to attain the prescribed milestones to qualify for the funding. The question really is whether an airline can attain milestones when it has failed to improve performance in the past six years. Can the prospect of infusion of funds act as a catalyst when the threat of survival hasn’t in the 2007–13 period?

It has been said often enough by the ministers of civil aviation that Air India has the capability to fly out of the red. It can. But only if it is run like an airline, not as a ministerial fiefdom. Rather than micro-managing the airline, the question that the government must seriously ask is how best this goal can be accomplished. Also, money alone cannot ensure Air India’s survival; its inherent weaknesses need to be addressed, and that needs focus and dedication from all those involved with steering the airline out of crisis. This is missing, and the government’s lack of commitment towards the airline is quite clear from the fact that it has never had the gumption to take tough decisions. The
Economic Times
summed up the implications of the bailout well in an editorial (14 April 2012): ‘It postpones the inevitable: the need to take some hard decisions about the publicly-owned airline that has suffered greatly on account of mismanagement, union blackmail and a warped, irresolute and incomplete merger, all underwritten by political interference. The package fails to address these structural and operational problems, stemming from lack of operational autonomy.’

In my experience with the airline and understanding of the way it has been managed, the only way forward would be to bring in a team of professional managers. The airline should look at picking out people who are considered to be the best in the business instead of restricting itself to insiders who are often too weak to resist political pressure and have not been groomed for the roles they are assigned to.

Air India could draw a few lessons from IT behemoth Infosys, which not too long back was considered the bellwether of the Indian software sector. Its performance has sagged over the last two years and the company recently brought back its founder N. R. Narayana Murthy to helm its turnaround. Speaking at the annual general meeting of Infosys on 15 June 2013, Mr Murthy, who has been named executive chairman, said that the company’s loss of focus on its bread-and-butter revenue strategy of winning ‘highly competitive, large revenue-yielding outsourcing projects involving application development, maintenance, testing, BPO and infrastructure management’ had hurt the firm. Giving himself three years to help Infosys get back to its winning ways, he forewarned, ‘There will be some tough decisions resulting in pain as we move forward.’ Air India needs a leader like Mr Murthy. It needs someone who can recognize the problem and, instead of opting for easy ways to sidestep the issues, is not afraid to take the bull by its horns. The government too must let go of the tight control that it currently wields on the management for if it does not, it may soon be left with no airline to control.

To invoke the title of a popular book
What Got You Here Won’t Get You There
by Dr Marshall Goldsmith, I feel that the same is true for Air India: the solution has to be different from what caused the problem in the first place. But the airline’s leaders seem to be intent on repeating their mistakes. Consider the recent exercise of appointing five non-official part-time directors on the board of Air India—Gurcharan Das; Prem Vrat; Air Marshal (Retd) K. K. Nohwar; Ravindra H. Dholakia and Renuka Ramnath. Similar experiments had been conducted in the past, with only the names of the appointees being different, but the impact on the airline had been negligible. The problem was and remains with the airline’s work ethic and environment, which does not encourage even the most talented individuals to excel. While there is no doubt about the professional skills of the chosen team members in their respective areas of operation, few know the airline business or are aware of the peculiar problems of Air India.

NO LEVEL PLAYING FIELD

It has been a common refrain that the government should let all the airlines function in a level playing field. Many of Air India’s detractors have hinted that the private airlines have to deal with unfavourable market conditions while Air India gets preferential treatment for its status as a government airline. Such a view is not just erroneous; it could be dangerous for the future of Air India.

Having worked with Air India for over two decades, it surprises me that the analysts and commentators who make a case for concessions for the private sector ignore the long list of social objectives that a government-run airline has to mandatorily fulfil. Air India has to operate VVIP flights for the president, the vice president and the prime minister, oversee and operate flights for the Haj, commission flights at short notice for national disasters and bail out Indians from international crises, apart from fulfilling other official duties. Even though the government compensates the costs incurred, the loss suffered by the airline due to consequent flight cancellations and passenger ire as the special flights are often summoned at short notice cannot be quantified. Additionally, Air India honours its commitment of ensuring adequate connectivity in the North Eastern region, unlike the private airlines, which operate less than their quota because the flights are not economically viable. Which private airline has to meet these and many more such conditions?

As a public sector unit, Air India also has to meet the employment criteria of the government. It thus has far more people on its rolls than any private airline. Besides, many of its employees are forced to engage in unproductive functions such as dealing with the ministry, answering questions raised in the parliament, coordinating with the Rajbhasha Department for promotion of Hindi in the functioning of the airline and such other activities. More importantly, more the time the CMD spends on such matters, the less time he has to strategise and focus on steering the airline. M. P. Mascarehnas, who was the managing director during the period 1997–2001, says that 75 per cent of his time was spent in ‘non-operational work’.

As a government-run airline, Air India is also forced to work within a bureaucratic operational framework. Decision making is slow, and that impacts the airline’s ability to counter adverse market conditions. For instance, Air India wanted to lease out three B777s in 2008–09 but failed because it was forced to follow long drawn out and mindless procedures for getting the decision approved. Jet Airways moved swiftly and managed to get around
325–375 crore annually for three years for its six aircraft which had been given out on lease. The situation hasn’t changed even in the wake of the current crisis. Recent attempts to lease out or sell surplus B777-200LR have been unsuccessful for more than a year now. When I drew Rohit Nandan’s attention to the problem and the need to do something extraordinary to succeed, he confirmed that they were struggling with procedures. When I suggested that he should follow the precedent set in 2005 and ask the ministry to set up an oversight committee and do as it had done while bypassing the system at the time of ordering new aircraft, I received no response, and justifiably so, because the bureaucrat–chairman has severe limitations.