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An airline hijacked

Air India (AI) is in an ICU and there are strident voices demanding its demise. Governments and most people have short memories. AI in the 1950s and 1960s was one of the finest airlines in the world and mentored Singapore Airlines. PC Sen writes.

india Updated: May 08, 2011 22:58 IST
PC Sen

Air India (AI) is in an ICU and there are strident voices demanding its demise. Governments and most people have short memories. AI in the 1950s and 1960s was one of the finest airlines in the world and mentored Singapore Airlines. It is true that after the 1970s, AI and Indian Airlines (IA) often had turbulent flight paths. But never were these airlines in the state the merged airline is in today.

In the early 1990s, IA faced rampant and endemic industrial unrest, with strikes being an annual feature. Come winter, there were fogs, strikes by employees and exits of chief executives. The airline suffered huge losses, market share plunged, passengers voted it the ‘least preferred airline’ and there was a massive exodus of pilots and engineers to private carriers.

However, within a few years there was complete industrial peace, the airline made a modest profit, there was a reverse flow of pilots, employee productivity increased and IA was declared the ‘most preferred airline’ in every survey. The marketing efforts of the airline bagged 22 awards, including two prestigious international ones, and the market share rose from 58% to 69%. What exactly happened after that to create the total mess the airline is in today?

The fault, dear friend, lies not in the skies, but in Rajiv Gandhi Bhavan. This is now official, with the Comptroller and Auditor General (CAG) of India stating that losses of the airlines were mainly due to wrong decisions regarding the purchase of aircraft, made under pressure from the ministry of civil aviation.

During my tenure as chairman and managing director of IA, I had served under several ministers, the longest tenures being those of Ghulam Nabi Azad and CM Ibrahim. I can state without any hesitation that there was not a day’s interference from either of them or their offices. Subsequently, when there were attempts to pressure IA to purchase turbo prop aircraft, successive managements informed the ministry that since the operations of these aircraft on the routes suggested were uneconomical, the airline was not prepared to go in for the purchase unless continuing subsidies were provided by the government. Some ministers had the wisdom not to interfere. When others tried, the IA management insisted on its ‘right to manage’.

To return to the CAG report which, though bold and path-breaking, hadn’t touched upon the unfortunate manner in which IA and AI were merged and the subsequent collapse of morale in the employees of both airlines. Till 2005-06, IA registered profits. The first decision to shake employee morale was to change the name of IA to ‘Indian’. In 2003 and 2004, the AC Nielson survey rated Indian Airlines among the 50 top brands at 7 — Taj Hotels was rated at 12 and Jet Airways 48. When brand equity was at its height, should the name of the company have been changed? Yet, this was done for reasons entirely unknown to both its employees and customers. In 2006-07, the airline suffered a loss of Rs234 crore. This was followed by the merger.

The NP Sen Committee in 1972, the MP Wadhawan Committee in the mid-1980s, the committee of secretaries in 1986 and AF Ferguson in 1988 concluded that while a merger was necessary, its implementation must be gradual, spread over a period of years if a “disastrous collapse of morale” was to be avoided. The Ferguson Report recalled that the immediate mergers of Vayudoot with IA and the National Airports Authority with the International Airports Authority resulted in chronic problems of personnel that persisted over the years. However, for reasons unknown to anyone other than the civil aviation ministry and the airlines’ senior management, both airlines were merged without any prior attempts to take the employees into confidence. As a result, losses rose from R234 crore in 2006-07 to R2,226 crore in 2007-08, an almost tenfold increase, and again doubled to Rs5,000 crore in 2008-09.

When British Airways was merged, the process took several years, and it is said that the chairman, Colin Marshall, attended most training sessions and was able to meet with thousands of the employees of the airline. Without any communication regarding the basis of their fitment in the merged airlines, employees of both IA and AI are a bewildered, frightened and lost tribe.

Former chairman and managing director of Tata Steel Russi Mody used to often repeat the adage, ‘morale is to other factors, as four is to five’. Richard Branson of Virgin Airlines, in a lecture delivered in India, remarked that his focus was always on the employee and not the customer since customers were bound to be served better if employees were well-trained and motivated. HCL CEO Vineet Nayar’s book Employee First Customer Second is a prescribed text at Harvard University. There is almost total unanimity in all modern management teams that employee morale is critical for the success of any organisation.

The government may pour thousands of crores into AI, but if employees remain dispirited, service will be poor, market share will drop and losses will persist. Now that the national carrier is in the condition it is in, is there any hope of revival? The path to health will be long and arduous, if at all. But of the measures that need to be taken, the most critical will be the restoration of morale by continuous communication with employees, the introduction of total transparency in decision-making, having an organisation that is board-driven and increasing professionalism.

What can be done immediately is to reverse the merger, by both airlines functioning under a holding company — a decision that can be taken as swiftly as the decision to merge, without any financial consequences. If this is affected, and the steps mentioned earlier taken, there is a chance that most of the current problems plaguing the national carrier would be significantly reduced. In any case, there is no harm in trying these measures, since things can’t get worse.

PC Sen is a former chairman of Air India and chairman/managing director of Indian Airlines. The views expressed by the author are personal.