that lags its competitors on every known parameter — marketshare, efficiency, interest burden, passenger services, strikes, uncertainty — has fallen before a never-seen-before audacity. It makes me wonder whether the UPA government’s inertia on AI is akin to its larger signature in this second term in office: a freeze on policy and action.
If there was an award for the world’s most mismanaged company, AI would qualify. Five years ago, the combined profits of the two entities Indian Airlines (IA) and AI stood at Rs. 75 crore; today, the merged entity AI has totted up losses of Rs. 8,500 crore. The productivity of its 40,000 employees, who take home Rs. 3,000 crore every year as salaries (that’s an average salary of Rs. 7.5 lakh per annum) is shameful — against the industry average of 150 employees per aircraft, AI’s stands at 243. If you want a very high salary with no work or accountability and still have the right to strike at will and go anywhere in the world once a year on free tickets post-retirement, join AI.
Not that the management has done any better. Ever since bureaucrats from the haloed Indian Administrative Service took charge of this company in 1995, it has been a downhill journey for what is hidden behind the expression ‘national carrier’. Why would any government appoint a chief executive for four months (Sunil Arora) or even for a year (Raghu Menon), I fail to understand. Worse, why the technical post of AI’s chief executive reserved for a generalist bureaucrat, nobody knows. Could it be that once the bureaucrat completes three years, he and his family are entitled to unlimited passes to fly on any route, domestic or foreign — and hence the race to stay for three years at any cost?
At the ministerial level, merging the two airlines — Indian Airlines and Air India — in August 2007 has failed and even though the company is now a single entity, its employees stand divided. While the director and general manager of operations at former Indian Airlines draw a little more than Rs. 4 lakh a month, their designational equals from former Air India draw more than Rs. 6 lakh a month — or about 50% higher. At the bottom of the pyramid, while a peon from former IA draws Rs. 12,000 a month, his counterpart from former AI takes home almost double, at Rs. 22,800.
From the passengers’ point of view, even as growth pangs of a nation growing at 9% per annum — the world’s second-fastest growing large economy — create a services deficit in all airlines, the blatant indifference at AI needs to be experienced to be understood. Worse than the service, the mediocre food or delayed flights, it is the sullen faces that tell you just how much you, the fare-paying passenger (as against its own free loaders), matter.
You are an irritant who gets them to somehow earn their high salary. AI’s falling marketshare is a reflection of that indifference.
But more than travellers and consumers, who will be taken care of by the market finally, we need to discuss AI as taxpayers. The company has accumulated losses of Rs. 13,000 crore, it has Rs. 22,000 crore of working capital loans to be repaid, a consultancy report says AI needs an equity investment of R17,500 crore to revive and the government has already infused R2,000 crore, with another R1,200 crore waiting. Incumbent CMD Arvind Jadhav says AI needs R10,000 crore as equity and an equal amount as debt.
But can AI be revived at all? Yes, but the answer doesn’t lie in capital infusion. That must follow, not precede, its turnaround. When the Railways was turning around under Lalu Prasad — it came from the brink of bankruptcy to a R20,000 crore surplus — it was done without fare increase. The political economy prevented that. On the other side, the real economy prevented the transporter to raise freight rates. It took some smart thinking that aligned the market with politics to turn the Railways around, AI needs a similar turnaround. The texture of this turnaround will be different from that of the Railways. Five steps:
Step 1: The government needs to build a consensus and demonstrate its will to end all political privileges, on or off tarmac, that have caused the downfall of this airline that is a shame to be called the ‘national carrier’. It would also be worthwhile for the government to investigate just how and when the airline got hijacked by its own employees and managements and conferred obscene privileges upon themselves — and then reversed. As taxpayers we will back the move politically.
Step 2: All these vested interests — from the top management and their petty entitlements, through the highly paid pilots and their false sense of morality around unionisation, right down to the bottom of the services reluctance — have to end. If that means the end of highly-paid incumbents, so be it. If it means the end of unprofitable routes, that’s alright — the losses on such routes should be taken up by the government, not the company. If it means the end of the airline being of the employees, by the employees, for the employees with sprinkles of vested interests crisscrossing it at various points, that’s fine too.
Step 3: Bring about a financial reengineering under which the company moves towards sustainable profits — unlike the Railways that is being run aground by Mamta Banerjee. A better utilisation of assets, keeping operations as well as the balance sheet in mind, would help.
For employees it means either a reduction in staff strength or greater productivity — preferably the latter.
Step 4: Show us taxpayers a plan that’s more than a few power point presentations. More than anything else, the plan needs earnestness — display that honesty.
Step 5: Privatise the company, first by bringing in a strategic partner with operational control with no political interference, and then by disinvesting through an IPO.
Only then will the word mismanagement cease to become synonymous with AI.