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What Air India needs is professional management and not mere administration by the bureaucracy. The remedy is privatisation, and the sooner the better.
Photograph: Abhishek / Sp guide pubns
T
he National Aviation Company of India Limited (NACIL) was established three years ago to oversee the merger of Air India and the national domestic carrier, Indian. Since October 26 this year, rather thankfully, the company has shed its rather pedestrian designation and the merged company has been renamed as Air India. Certainly, a more dignified and inspiring identity! However, the prevailing woes of the erstwhile NACIL are indeed overwhelming and cannot be just wished away or concealed under the new mantle. Air India and Indian were merged in March 2007 to improve the financial state of the two companies through the integration and more efficient utilisation of resources with the two entities. However, even after three-and-a-half years and expenditure of hundreds of crores of rupees, the process of merger does not appear to have made much headway. From reports in the media it appears that at present the national carrier is seemingly in difficult financial state to put it mildly. Air India’s total debt burden stands at over `40,000 crore. Much of it is related to the acquisition cost of the fleet of 111 aircraft which has been ordered and several of which have been delivered. Over the next decade, this involves an annual commitment of around `3,600 crore towards repayment of capital and `2,400 crore towards interest. Over the last four years, the airline has incurred losses amounting to `14,000 crore. During the last financial year, the airline had received an equity infusion of `800 crore from the government as a part of `2,000 crore bailout plan. Infusion of the balance of `1,200 crore was deferred to 2010 and was linked to a restructuring plan of which Air India has apparently nothing to show as yet. There is also discreet silence on the subject on the part of the Ministry of Civil Aviation. A reluctant Cabinet Committee on Economic Affairs may have no option but to accord approval, al40 SP’S AVIATION Issue 12 • 2010
beit with some debate and possibly delay. However, given the overall financial state of the airline, in the assessment of the Board, the Airline is badly in need of a one-time infusion of `10,000 crore primarily to clear mounting dues and not piecemeal equity infusion. Ever since May 2009, when Arvind Jadhav assumed charge as Chairman and Managing Director (CMD), the airline is believed to have been embarked on a financial turnaround plan to enhance revenue and cut losses. However, despite his respectable credentials and brilliant track record, the new CMD has evidently not so far been able to get his act together. And the Ministry of Civil Aviation has not been of much help either even though there has been continuity in leadership of the Ministry between UPA-I and UPA-II. During the financial year 2009-10, Air India posted a net loss of `5,551 crore despite the surge in demand for air travel during this period which the private carriers have successfully exploited to their advantage. Air India, on the other hand, has been plagued by management-union conflicts, pilots strike, a major air disaster at Mangalore and the Terminal 3 fiasco at Delhi airport that continues to linger. There have also been reports of crisis of confidence between the independent members of the Board and the CMD believed to be triggered by alleged irregularity in appointments in the top echelons of the organisation. While the crisis over the appointment of the Chief Operations Officer for Air India Express appears to have been diffused for the time being, the management does not appear to be unduly concerned about the precarious financial state of the airline. Expenditure on five-star hotel accommodation for Delhi-based pilots handling managerial responsibilities in Mumbai and on an expensive bungalow in Delhi are a burden which the cash-strapped airline can ill afford. Some of the senior appointments in the recent past with salaries ranging from `1.2 crore to `3.1 crore along with lavish perks, are not only dichotomous but bordering the obscene. There is little doubt that the so-called restructuring plan, if at all there is one, is not working and the airline will in all probability continue to slide deeper into the red with consequent burden on the exchequer. What Air India needs is professional management and not mere administration by the bureaucracy. The obvious remedy is privatisation, and the sooner the better. SP — Air Marshal (Retd) B.K. Pandey www.spsaviation.net