Air India’s fate up in the air
Air India flights are back to normal schedule and pilots are back at the cockpit. But that wasn’t the real story. Behind the hangover of sulking pilots and a hassled management lies a story of deepening financial crisis, missed opportunities and utter disregard for laid down roadmaps.india Updated: Oct 02, 2009 21:06 IST
Air India flights are back to normal schedule and pilots are back at the cockpit. But that wasn’t the real story.
Behind the hangover of sulking pilots and a hassled management lies a story of deepening financial crisis, missed opportunities and utter disregard for laid down roadmaps.
The roots of the airline’s current troubles lie in May 2007, when state-run aviation companies Air India (international flag carrier) and Indian Airlines (domestic carrier) were merged to form the National Civil Aviation Company of India Ltd (NACIL).
The merger, facilitated by global consulting firm Accenture, was carried out to achieve focussed objectives — cutting costs, achieving economies of scale, creating a big airline with a single large network and footprint across India and world, and eventually make profits.
This merger involved a one-time cost of about Rs 200 crore but was estimated to yield cumulative annual benefits of about Rs 600 crore.
The benefits never came.
“The question that needs to be asked is whether the projections made by consultants were wrong,” said Sanat Kaul, a former bureaucrat at the civil aviation ministry. “If there was a plan of action, somebody has to implement it. I would say, it is more case of poor implementation.”
Accenture had suggested a new organisational structure for NACIL that would broadly comprise a governing board, a corporate body and six strategic business units (SBUs), one each for passengers, cargo, aircraft maintenance and repair, ground handling, low-fare operations and other related business including information technology (IT) services.
Ironically, Air India’s desperate turnaround announced in August this year, includes plans to set up SBUs of non-crore areas on the lines suggested by consultant two years ago.
The management, smarting under a five-day strike by a section of its pilots over a dispute on the proposed 50 per cent cuts in incentive pay, would have to hammer out other means to cut costs.
The strike has left the airline poorer by about Rs 100 crore, but experts said it has significantly weakened the management’s negotiating handle to reduce the wage bill.
“I think the management would feel let down by the employees,” said M S Balakrishnan, former additional director (finance) of erstwhile Indian Airlines. “Some harsh measures would have to be taken to cut costs.”
There is a view that the merger was thrust upon the airlines that weren’t ready for it. “If employees are consulted for pay cuts, they might as well have been consulted for the merger,” a former senior executive of the airline who did not wish to be identified said.
“It is imperative to complete the merger process as early as possible and move to single code,” said Ankur Bhatia, who heads private aviation firm the Bird Group.
So, just how can Air India turn around? “The management has to be professionalised and the airline privatised,” said Kaul.