The Descent of Air India (8 page)

In a meeting of departmental heads held on 30 August 2003 and chaired by the then civil aviation minister, Rajiv Pratap Rudy, to review the performances of the departments, I decided to talk about the problems. I outlined the structural changes that Air India needed and these were recorded in the minutes of the meeting. With respect to the departmental heads and their work ethic, I reiterated, ‘There is also an urgent need to bring about a change in work culture. At present, decisions are perceived to be taken by individuals, and not by the management as a whole, with the result that these individuals become targets of unions after an agitation gets over. A decision taken at the department level after due deliberations must be deemed to be that of the company, and there should be no subsequent retraction from the stand taken. This is essential to encourage executives to take bold decisions in the company’s interests.’ I was speaking out of personal experience.

Call for change

(Excerpts from the record note of the meeting between senior management and Rajiv Pratap Rudy, dated 30 August 2003)

1. If Air India has to be made into a premier airline, and not allowed to become only a surviving airline, there is an urgent need to look at the structure of the Air India Board. There is a need to give representation to functional directors on the Board. This is essential to ensure that the decisions taken after due deliberations at the Board level with participation of functional directors are implemented, and there is continuity. The present structure of the Board is too individualistic, which allows change in company policies, with the change of one individual at the helm.
   
2. The present management structure was devised several decades ago when market conditions and requirements were vastly different. To ensure that the company operates in a more innovative and determined manner, there is a need to restructure the departments and management set up.
   
3. The present competitive environment requires constant upgrading of managerial skills. In the total absence of training for management personnel at all levels, including those holding senior management positions, proper leadership in management ranks is unlikely to emerge to beat competition.
   
4. There is also an urgent need to bring about a change in work culture. At present, decisions are perceived to be taken by individuals, and not by the management as a whole, with the result [that] these individuals become targets of unions after an agitation gets over.
   

LOSING THE PLOT

The departments were unable to pull themselves together, and despite the airline’s growing problems, none was willing to stand up and stem the rot. The airline’s leadership was indifferent and passengers began to abandon the airline. Just as the fliers’ interests were ignored, so too were those of the airline. The way the Commercial Department operated even as the market dynamics were changing is a case in point. It should have focused on revenue generation and identifying potential business opportunities. It should also have led from the front in introducing new and global marketing practices. Instead, the departmental officials displayed a strangely cavalier attitude towards new business, which had a direct and critical impact on the airline’s load factors, market share and profitability. The impact of their actions is perhaps best reflected in the way revenues failed to pick up, even after Air India inducted new aircraft and introduced non-stop flights on the India–US sector, effective August 2007. The new product failed to command even a modest premium and fares had to be pitched at or below market fares and far below costs. The irony was that although Air India’s first and business class product on the non-stop India–USA route was as good as the best in the industry, it had the lowest flight load factors. Even today, it stands at a dismal 12 per cent for first class, which is lower than the figures that Air India managed to garner with its older 747-400 aircraft. In addition, the seats are being sold primarily under the ‘fly a companion free’ scheme. As a result, Air India is still losing a huge amount of money almost
1 crore, on every return flight to the USA.

The problem of poor load factors in the premium classes has dogged Air India for several decades. In fact, it was first identified by J. R. D. Tata in 1981 in a letter to the then chairman, Raghu Raj, in which he wrote, ‘I have consistently pointed out the importance of changing the policy we had wrongly followed in recent years of concentrating all our sales efforts on excursion and other promotional fare traffic, the yield from which is less than one-fifth of that of first class traffic… I am satisfied that our first class service has always been, and is today, as good as, if not better than, that of other airlines. In fact, a flight in first class on Air India, with its outstandingly comfortable slumberette seats, is far superior to one on Swissair, and yet Swissair’s 22-seated first class cabin is always full. I could not get a seat on Swissair recently, even as a paying passenger.’ (See
Appendix 1
.)

The note was preserved, but its contents forgotten. Load factors continued to drop year after year, but the officials in the Commercial Department responsible for sales and promotion were indifferent to the need for change. I asked a former commercial director, who had held the position in Air India’s heydays, why the department had let the company down. He said that the department had stopped attracting the best talent for a while. But the situation had worsened in recent years because, he said, unlike in the past, critical positions were being assigned in an arbitrary manner. In the 1970s and the early 1980s, he said, ‘The better lot of officers went to prime overseas stations like New York, Paris, London, Tokyo, etc., and the not-so-competent officers were posted to Kuwait, Dares Salaam, Nairobi, etc.’In the later years, the prime posts started being offered to those who lobbied the hardest. Thus, the department found greater benefit in focusing on how to secure a prime overseas post, and not on increasing the airline’s passenger load factor.

In fact, as early as in 1992, Y. C. Deveshwar, perhaps drawing on his own experience of never having been contacted by Air India’s sales team, had pointed out that the Commercial Department was neglecting its constituency by not visiting the corporate offices to seek business and asked for action on the matter. But his comments were ignored. I was forced to raise it with K. Roy Paul, the chairman, in a letter dated 22 October 2002 after a meeting convened to discuss the marketing of Air India’s first class offering in Delhi. This meeting was held after it was decided to instal flatbed seats in the first class, and I said that we needed a ‘dedicated core team’ for ‘approaching passengers who travel to westbound destinations in first and executive class, to inform them about our revamped product’. I also asked that ‘a survey be undertaken at airports in metro cities to build a data bank of personnel who are presently patronising First and Executive classes of British Airways, Lufthansa, North West, Delhi for their travel to western destinations.’It is well known that in the aviation business, it takes years to erase memories of a failed product, and I thought it best to take an aggressive stand. Also, to get the Indian industrialists back on our list of fliers, I suggested that the senior directors and general managers of the company who are articulate be drafted for individually meeting senior-level people like Ratan Tata, the Ambanis, the Birlas, the Mahindras, and the Godrejs since the existing sales team was unequal to the task. I again raised the issue of inter-departmental cooperation and said, ‘The existing setup—wherein the Commercial Department looks after sales, the In-flight Services Department looks after the menus, champagne and wines served to first class passengers, the General Manager of the Airport decides the system of check-in and the Ground Services Department sets parameters for baggage delivery—should be replaced by a single unit, so that the ‘first class’ product is looked at in its totality and follows global benchmarks, which should be set for the product. Integration of various departmental functions is imperative to evolve a top-grade product and ensure implementation, so that no department blames the other for any deficiency in the product. The unit should be fully accountable for enhancing the revenue.’ (see
Appendix 2
) A single unit taking responsibility for the product was critical for bringing about uniformity in the quality of the product, but this suggestion, too, was ignored.

Not only did the Commercial Department come a cropper on revenue realisation in the 1990s, it was also negligent of its role in marketing the airline. For instance, in the early 1980s, when colour TV was first introduced in India, Air India had run a special scheme for its flights from Oman—‘Take your TV with you at no cost when you travel Air India’—signifying a waiver of excess baggage charges. Several passengers switched airlines to avail of this scheme. No such initiatives are in evidence today.

The airline also used to be a smart advertiser and in spite of a low advertising budget, its campaigns were the talk of the town in its heydays. The legendary Bobby Kooka, who had been a commercial director at Air India, was as popular as the Maharajah—the mascot he had created. But over time, the airline’s management team either failed to see the rationale of marketing spends and advertising campaigns or they were simply unable to come up with anything that was as effective. I was disillusioned as there were no meaningful measures being taken to halt the slide in the airline’s fortunes. As the head of In-flight Services Department, I wrote to the managing director, M. P. Mascarenhas, asking for an enhancement of services for the first class passengers. I said that we were ignoring the first class passengers and that ‘we need to be conscious of the fact that we will lose even the ones who patronise Air India, if we can’t maintain our product’ (see
Appendix 3
). It was important, I had mentioned in the same note, that we ‘analyse the First Class load; percentage of those travelling on full fare and those travelling under the companion scheme. The analysis will hopefully tell us whether we can afford to ignore the interests of full fare paying passengers by cutting down costs on first class service.’ I had suggested that we offer the best and try to increase the first class load ‘through innovative and more aggressive marketing, and not through companion scheme only.’ But nothing was done about my suggestion.

WEAK AND INEFFECTIVE HR

J. R. D. Tata had exhorted: ‘I want to establish that there is no airline which is better liked by passengers; that is safer and more punctual, where the food and the service is better and which sets a better image than Air India.’ His words did not just inspire but set a clear goal for all employees. Air India had to be the best in the business, not just in terms of safety and punctuality, but in every aspect in which it touched passengers’ lives. His vision led the airline, which had some of the best talent in the airline business at the time.

Subsequent years saw JRD’s words lose their import. The chairmen/managing directors who followed either lacked knowledge of the aviation business or had no experience in managing a commercial entity. None had a vision for the airline and if they did, they failed to articulate it as clearly and as plainly as JRD had done. And that led to a steady dilution of the standards and values of the airline.

At the core was the problem of a weak HR department. It was led and managed by a team of people who were ill-equipped for the role, with very little interest in building a strong airline. For instance, Air India had no training culture and the HR department did not institute one, not even when the airline was facing a rapidly changing market and being threatened by competition when it should have had the best skills on-board. The HR department should have also ensured that leadership roles at the departmental level were clearly defined and tracked. It should have set up a smooth succession line for the airline, whereby potential candidates could have been groomed to take over key positions in the airline. The HR department did not do that, and as a result, the organisation has always had a skewed promotion policy based on seniority, not merit.

Most professional companies with a desire to ensure continued leadership in business have elaborate succession plans. In Air India, seniority was the determining factor and hence, we knew who would take charge once an incumbent departmental head retired, but there was no attempt to assess his capabilities in the new job or train him for the position. Also, there were several instances when the chosen successor had barely a few months of service left, and hence his appointment was a stopgap arrangement, with the candidate being chosen simply because he was the most senior in the department. The newly appointed chief would thus neither have the time nor the inclination to get to know the role of the department, understand its problems and study emerging market trends. The question of suitably changing the product or service offering and/or the work practices, as the need be, thus never arose at all. Apart from impacting the airline’s prospects, the ad hoc nature of promotions also affected the work ethic. The departmental heads, who were themselves unaware of the changing business, were unable to motivate employees to give their best or inspire them to upgrade their skills.