Flying into an air pocket
The fact that Air India has to go in for a second restructuring barely a couple of years after it merged with Indian Airlines raises a few uncomfortable questions.india Updated: Jul 08, 2009 23:08 IST
The fact that Air India has to go in for a second restructuring barely a couple of years after it merged with Indian Airlines raises a few uncomfortable questions. The logic of that merger has not been completely upended by the external environment. The economies of scale that were to accrue, a consolidated domestic and international reach and an upgraded fleet are part of any airline’s medium-term goals. What went wrong is a mishandling of the merger process. Two flabby organisations have not coalesced into a leaner structure, capacities have expanded despite a slump in the industry, fleets by competing aircraft manufactures do not permit operational synergies while parity between employees of the legacy airlines is elusive, and the airline continues to be headed by bureaucrats with little experience of aviation.
These are self-inflicted injuries even as the Indian skies turn increasingly hostile. Indian airlines are expected to have lost $1.4 billion in 2008-09, a disproportionately large number for a country that accounts for just 2 per cent of the world’s air traffic. Globally, the International Air Transport Association (IATA) estimates that airlines lost $8.5 billion to the recession in 2008. But while Jet Airways and Kingfisher Airlines, Air India’s principal competitors at home, were reducing their domestic capacities by 20 per cent and 13 per cent, respectively, Air India kept taking delivery of the aircraft it had ordered from Boeing and Airbus, raising its capacity by 5 per cent. The State-owned carrier, naturally, has the highest ratio of seats going empty at four in every ten.
The vision that Air India lacks can be imported from the private sector. Thus, talk of drafting Ratan Tata — whose uncle J.R.D. Tata founded Air India — to head an oversight board and head-hunting for an aviation professional to run the airline are long overdue measures. The failed marriage with Indian Airlines also needs to be looked at, both from the conceptual and implementation dimensions. Induction of a strategic partner for Air India cannot be put off indefinitely if it has to survive in a cut-throat market. No airline can afford to fly without knowing where it is headed. The cash crunch Air India is facing is a good enough opportunity to put together a team that can take the airline out of its tailspin.