Air India doesn’t want to be saved

Mangalore Today / PTI

By Sandeep Bamzai



New Delhi, April 15: Mommy, I don’t have any money, please give me a handout. Help. What is it with public sector behemoths who with their incessant and errant profligacy constantly run to mommy or in their case nanny and ask for bailouts?

Isn’t it incumbent on them to run their company profitably? Isn’t it incumbent on the management and the staff of Air India to look inwards, cut flab and pare salaries and allowances? Or is it only incumbent on a bleeding government to provide dole after dole despite the shocking disregard for public money by the airline’s staffers.

Good money is constantly being thrown after bad money in the case of Air India. On December 31, 2011, the total outstanding debt on the books of Air India was a humungous `43,777 crore. Its accumulated losses over the last four years alone – a staggering `20,320 crore.

 

With a dauntingly feeble employee base and the Air India-Indian merger, which seems to have no silver lining, the future of the airline, to put it mildly, appears bleak


And we talk of a rising fiscal deficit. Public money being spent on bailing out these sick companies only compounds the woes. Can one turnaround this airline?

No, it is too late in the day. As long as Rajiv Gandhi Bhawan and its mavens run policy pertaining to the airline, this will not happen. Mandarins are control freaks, Air India has been bled to death by a thousand and more cuts over the years.

If someone turns around and tells you that elevated levels of crude are responsible for the airline’s vicissitudes, forget it. Say Bah and move on.

Blaming your problems on crude is the easiest thing to do. Look within and answer the question. Have you been truthful about the way the airline has been run? Not just by the control freaks who want to milk it, strip it and tear it down for whatever it is worth, but also by the government which doesn’t want to cede control.

From tickets to booze, it is a dangerously careening vector which has left it perched precariously, teetering on ruin. An employee base which is scary, a shotgun merger between two cadavers- Indian and Air India- which pretty much ravaged it and the absence at all levels, of any form of operational autonomy have left Air India in sick bay.

 

Civil aviation minister Ajit Singh can’t duck the question: Why is he delaying the inevitable?

Actually the sick bay is an ICCU and though the government has promised a `30,000 crore package over the next eight years, it is a disastrous decision hurriedly taken by emotional people.

We have seen that bailout packages cannot resuscitate this airline; its structural problems are too deep set. A hurried merger, still not effected organisationally, has only hastened its demise.

Does India need a national carrier? Not if we cannot run it efficiently. Should the airline be shut down or hawked off? Yes. Dang, if you cannot run it and don’t have the necessary wherewithal and bandwidth, why should funds from the public exchequer be given to you?

Has the staff of the airline, numbering close to 32,000, shown any overt move to discipline itself over the last few years? Again the answer is in the negative.

An airline that spends more than what it earns daily has no business to stay afloat. It earns `36 crore per day-`22 crore from domestic and `14 crore from international operations.

But its daily expenses are a staggering `62 crore, which means it is running up a daily deficit of `26 crore. High global fuel prices are not helping the airline. It spends `14.5 crore a day on aviation turbine fuel alone.

A crucial part of Air India’s turnaround involved the creation of two strategic business units whereby ground handling and engineering services will be hived off from the airline.

This was to result in two subsidiaries-Air India Engineering Services Ltd and Air India Transport Services Ltd. As many as 21,500 employees from the airline’s 32,000 staff were to be moved out. The airline was thus to be leaner with just 79 employees per aircraft.

Many reckoned that running Air India as a standalone airline without the heads of ground handling and engineering would improve efficiency. But as with so many plans regarding Air India’s turnaround, the best laid plans of mice and men often go awry.

In many ways this was also a statistical illusion or even deception, as one would hide the bulk of the employees in SBUs and show the airline to be profitable.

Euthanasia is the only way forward. Many will question my extreme views, why can’t it be sold will be the first poser? Why should anyone buy it will be my counter question?

Few years ago, with recapitalisation, there was still hope by going for a listing and professionalising itself, but that bus has reached its destination and AI wasn’t on board. What value does it bring to the table anymore? Do the pilots of the erstwhile Indian Airlines and Air India see eye to eye - No.

Has any rationalisation taken place? The creation of strategic business units has been opposed, turnaround plans have floundered, a general lack of will goaded and driven by a combination of inertia, lassitude and self preservation have ensured that nothing moves on the canvas called Air India.

Acute willful neglect, the greed to strip the airline for freebies, goodies and what have you, a mindset and a culture which borders on backwardness has left the airline in tatters.

A couple of years ago, Deloitte Touche also prepared an action plan, but all to no avail:

MONETISE LAND

The turnaround plan considers revenues under non-operating revenue heads - mainly receipts from lease rentals, income from assets and income from monetisation of assets through financial year 2009. Air India (AI) has slots at various international airports, land and buildings at multiple locations.

AI’s annual report for 2008-09 reveals that land held by it was valued at `705 crore for freehold land and `6,353 crore for leasehold land. Moreover, AI had building assets valued at `1,535 crore at the end of financial year 2009. AI was also keen to monetise assets like its building at Nariman Point.

RECAPTURE HOME MARKET

Air India had proposed an aggressive increase in capacity and recapturing of domestic market share. In 2009-10, AI carried about 7.6 million passengers (out of a total of 45 million in the country).

AI then proposed to target 17 million passengers in 2015, while increasing its passenger load factor to about 75 per cent on its full service operations and 80 per cent on its low-cost operations by 2014-15. Strategy of using Indian Shuttle is crucial to achieving this.

Plan is to provide connectivity between key metros such as Delhi, Mumbai, Chennai, Kolkata at high frequency- approximately every half hour. AI wants to capture the connection-sensitive demand going head to head with competing airlines especially the low-cost carriers.

CUT FLAB TO STAY IN SHAPE

In the turnaround plan, an expense of `3,609.27 crore has been estimated by AI for 2010-11. For 2011-12, a reduction in costs has been considered to the extent of 51 per cent on account of the proposed hiving off of the Ground Handling and Maintenance, Repair and Overhaul (MRO) business.

There is no ostensible or constructive movement on any of these fronts. The marriage of Airbus and Boeing fleets perhaps is where the problem starts.

With a wage bill which is in excess of `3500 crore and fuel cost of over `5500 crore, there is no future if the airline doesn’t either downsize through an aggressive voluntary retirement scheme or voluntarily decides to take a pay cut across the board. Troubled, ailing and all other adjectives are now in the past; with this fresh cash impetus, a criminal act in my view, we are witnessing the end game.

Civil aviation minister Ajit Singh, a great votary of state support for PSUs, may have got his way with the bailout, but he is only delaying the inevitable.

No, this Private Ryan cannot be saved. It probably requires the equivalent of the Navy Seals to terminate it.