Adding insult to injury, no bids were received for taking over our national carrier, Air India. The Government has felt too embarrassed to comment; speculation is rife about its next step. Not surprisingly, instead of feeling contrite, Air India unions gleefully welcomed this development. A more responsible but less shameless set of employees could have felt offended to learn that they had reduced the value of a world class airline to zero, but Air India workers saw it as a licence to continue with their wayward ways.
The Air India sell-off had evoked a wave of nostalgia, particularly in people of the older generation. There was a time in the 1950s and Sixties when Air India and its country cousin, Indian Airlines, were the pride of the nation; AI was our own airline which was giving tough competition to first-world airlines. Though few Indians could afford to fly but all Indians took immense pleasure in the antics of the moustachioed Maharaja.
Air India hostesses were justly famed for their beauty and poise; at least some of them married industrialists who had had flown with them. When it was flying high, Air India helped a number of Asian countries like Singapore and Malaysia to set up their carriers. Airlines of Gulf nations were set up by the expertise of Air India personnel hired privately. Alas, the golden days are gone now. Dubai airport not Delhi or Mumbai is the hub for Indian flyers.
The Centaur, a mythical creature half horse and half human, till recently portrayed on the logo of Air India aptly describes Air India; which is one half Government and one half a business entity, looks beautiful but is not of much use to anyone. The reasons for the downfall of Air India are myriad. Suffice it to say that the Government has always looked upon Air India as a milch cow.
In a famous incident, Prime Minister Rajiv Gandhi, who was once an Indian Airlines pilot, took two Air India jets to Vancouver for the Commonwealth Heads of Government Meeting; the Sultan of Brunei was the only other Head to come by his personal jet. Till today, Air India’s jets are requisitioned by the Government at short notice and bills are not paid for years.
After the opening up of Indian skies, the Government took hugely innovative steps to hobble Air India. For example bilateral agreements signed after the year 2000 have ensured that foreign carriers dominate Indian skies and the share of Air India keeps falling steadily in overseas travel. Then there was the hair brained scheme to add aircraft without any specific plan for deployment.
In 2006-07, Indian Airlines placed orders for more than 40 Airbus aircraft while Air India ordered 50 aircraft from Boeing. No passenger survey was done prior to this massive purchase. There was no staff or other infrastructure for flying these aircraft. According to a CAG report, five Boeing 777s and five Boeing 737s were kept on the ground from 2007 to 2009 resulting in a loss of Rs 840 crore.
More than 150 foreign pilots were hired at exorbitant salaries to fly these aircraft. It was sheer good luck that the delivery of B-787 Dreamliners was delayed; otherwise there would have been more losses for Air India. The interest on the advance money paid for the purchase of these aircraft accounts for the major share of the losses for Air India. Interestingly, there was no penalty clause for late delivery in the agreements Air India signed with Airbus or Boeing.
The merger of Air India and Indian Airlines (initiated in 2007 and completed in 2011) was the proverbial last nail in the coffin of the national carrier. No specific reason was given for the decision to merge the two airlines. It was probably felt that the merger of the two airlines would reduce redundancies with fewer staff and space being required to run the merged airline. However, this did not happen.
Scratch the surface and even today you will find Air India and Indian Airlines very much alive; one is Air India (International) and the other is Air India (Domestic). Prior to the merger, Indian Airlines was making modest profits while Air India was making modest losses. Post-merger losses started ballooning and even after infusion of Rs.25,000 crore by the Government, as of today Air India has a net worth of around Rs. 25,000 crore but has liabilities of around Rs.52,000 crore.
This should not have been the case. Air India was established in 1932 as Tata Air Mail, far earlier than any of its competitors. Tata Air Mail made a modest profit in its very first year of operation. Even today, Air India has a vast captive passenger population of Government employees. On domestic routes Air India gives a free baggage allowance of 25 kilograms compared to an allowance of 15 kilograms on other airlines; it does not charge for your seat or for payment made by card or net banking. Air India flies better aircraft; it also gives proper training to its crew and pilots. Fares on Air India are often lower than other airlines. Despite all these obvious pluses Air India is the airline of last choice for passengers.
Even a layman can see that bad management negates all the natural advantages Air India has. To recount: AI has the worst time slots, their counter staff takes the maximum time to check you in and you are likely to miss your flight if you are just in time, checked-in luggage takes ages to reach the belt and flights are often delayed or cancelled without reason. The unhelpful “I don’t care” attitude of the staff completes the AI flight experience. There are myriad passenger complaints on the Air India page on Facebook, to which Air India has not bothered to reply.
There is an abundance of everyday examples of the self-destructive attitude of Air India. While availing LTC, Government servants are obliged to fly Air India on special LTC fares, which are much higher than normal fares. From November to January, the Delhi-Port Blair flight is booked months in advance.
A rational approach would have been to deploy the best aircraft on this route and if possible increase the number of flights. However, till recently a very small airplane was deployed on this route which often would not fly because of strong winds in December and January. Invariably, Air India would announce the cancellation of the flight only at the last minute. The amount of goodwill and revenue lost can only be imagined.
In 2015, after heavy losses, Air India decided to rent out its headquarters at Nariman Point at a mind-boggling rent of approximately Rs. 300 per square foot per month. The rent of each floor came to crores of rupees. Despite the clamour of prospective tenants for quick possession, on the pretext of taking out some condemned furniture, Air India took months to move out. Thus unnecessary loss of crores of rupees was caused to Air India by the lackadaisical attitude of its employees.
Many a time flights are delayed because of Air India employees not turning up in time; sometimes staff does not report at all leading to flight cancellations. This impunity arises from the fact that the entire workforce of Air India is heavily unionised. Pilots, drawing astronomical salaries, are known to strike work at the drop of a hat without any adverse consequence because pilots are classified as “workmen” under the Workmen’s Compensation Act.
A suggestion mooted by the industrialist, Sri Anand Mahindra, involves turning around Air India before its sale. However, it is highly doubtful if Air India can be rejuvenated without a fundamental change in its corporate culture. Moreover, it has 234 employees per aircraft, almost double the industry average. Hence, the condition that the buyer would have to retain all existing employees seems to have deterred prospective bidders who would not like to be saddled with a bloated and cantankerous work force.
Even today, Air India has a 42.8 per cent share of international traffic and a share of 12.3 per cent of the domestic market. Air India has office buildings and residential colonies at prime locations in all metro cities mainly Mumbai.
The market value of the route rights, real estate and aircraft owned by Air India far exceeds the accumulated liabilities of the concern, but the condition that the Government would retain 24 per cent equity in Air India dampened the enthusiasm of intending bidders. Given its track record no businessman would want to partner the Government of India.
Things are looking increasingly bleak for Air India; staff salaries have been delayed for the last three months, further demotivating an already demotivated work force.
The solution lies squarely with the Government; it can either sell Air India on an as-is-where-is basis or prune its workforce, give it sufficient cash and a competent management. The halfway house approach has failed; the Government has to treat the sale of Air India as a commercial transaction not as a matter of State policy.
The writer is a retired Principal Chief Commissioner of Income-Tax