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Fasten the seatbelts

Air India needs to learn from its past. Its management must see employees as part of the solution, not the problem, says PC Sen.

india Updated: Jul 15, 2009 23:06 IST

Air India is making news these days for all the wrong reasons. Articles speak of burgeoning losses and directions being issued for cost-cutting, employees being asked to ‘shape up or ship out’, and being permitted to seek alternative employment while remaining on the rolls of Air India.

In the mid-90s, Indian Airlines and Air India went through similar crises. Though the members of the boards were common, the managements of the two airlines adopted very different strategies. Air India reduced staff and stations on its network and closed down offices; Indian Airlines (IA) retained its work force, increased emoluments, commenced new routes and moved into profits in a few years.

In 1994, IA faced rampant and endemic industrial unrest. Strikes took place every year, leading to the exit of chief executives — 1990 to 1994 seeing three Chairman and Managing Directors (CMDs) being forced to resign. Equally endemic were the losses, which commenced with the continued grounding of the entire spanking new fleet of 31 Airbus 320 aircrafts for over nine months, leading to a loss of Rs 127 crore.

Vayudoot, the feeder airline, collapsed and was merged with IA, carrying with it losses of over Rs 250 crore. The playing field for IA was not level, since while the national carrier had to air-link many stations that the private operators were unwilling to, private airlines could concentrate their entire fleets on profitable trunk routes. IA was, therefore, faced with an annual recurring loss of over Rs 250 crore a year. Recovery seemed impossible, since there was an exodus of pilots and engineers: 166 pilots including 17 commanders left IA for the private sector, which were offering emoluments twice that of public sector airlines.

By 1998, however, the situation changed dramatically. To begin with, there was total industrial peace. Unions did not even resort to ‘go slows’. From chronic annual losses, the airline achieved a modest profit of Rs 45 crore. (Incidentally, increase of fares did not contribute towards this, since increases were only resorted to match increases in costs of Aviation Turbine Fuel.)

With emoluments being paid to match the market, pilots’ shortage was overcome, and there was a reverse flow of pilots and engineers from private airlines to IA. However, the additional outflows of funds on account of increased emoluments were more than matched by the increased revenues resulting from rises in productivity.

Pilot productivity rose from 55 to 75 hours a month. The increased productivity of engineers was underlined by the fact that while in 1994-95, out of a fleet of 10 Airbus

300s, only four or five were flying on an average, by 1998, seven or eight were in the air.

From being rated the ‘least preferred airline’, IA was declared the most preferred airline in every survey. The airline bagged 22 awards, including two prestigious international ones. Its market share rose from 58 per cent in 1995 to 69 per cent in 1997.

The airline had a common board with the likes of Russi Mody as chairman and Deepak Parekh, Pratap Reddy, Pallam Raju and Inder Sharma as members. The strategy that top management adopted was employee-centric. TMI, the consultancy firm that played a major role in the turnaround of SAS and British Airways, emphasised the need of catering both to the ‘external customer’ and the ‘internal customer’, internal customers being employees, the belief being that unless they were served well by the company, they would not serve the external customer well.

Measures to increase morale included very frequent interactions of management with employees all over the country. The CMD and heads of departments, together with their teams, were on tour for over 20 days in a month, listening to employees. The top management flew economy, not to save money but to interact with the cabin crew and pay ‘major attention to minor details’ of service.

All major decisions were taken only after discussions in meetings attended by functional heads of all departments and regional heads. Morale and self-esteem were boosted by reminding employees that they served Indian Airlines. When Delhi Airport was damaged by fire, on reaching the spot at 3 am the management asked whether the first flight — and the flights thereafter — would take off on time. And they did.

Considering that employee morale was of paramount importance, while considering a merger, the management recommended that IA should follow the successful example of British Airways, and spread the process of merger over a five-year period, starting with a holding company and commencing the process by merging smaller and simpler entities, and utilising the time available to communicate to every employee the principles and processes being adopted for the merger.

Together with the induction of consultants and experts — and exercises of downsizing — some attention needs to be devoted to those who are expected to deliver a better product, with the recognition that people are an important part of the solution and are not the problem.

P.C. Sen is former Chairman and Managing Director of Indian Airlines and Chairman, Air India.