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An airline for sale

The fall of Air India has coincided with the rise of private airlines. While the behemoth, hamstrung by bureaucracy, could not match the agility of smaller players, crony capitalism also played an important part in Air India’s downfall. This is hardly surprising; State enterprises offering consumer services like BSNL and MTNL are in a similar position for similar reasons.

Devendra Saksena | New Delhi |

From all accounts, the market has not shown much interest in the Government’s second attempt at selling Air India, which raises some questions about the real state of affairs in the airline company. The Government has tried to sweeten the deal by taking on a debt of Rs 33,000 crore due from Air India but even after a fortnight, no concrete offer has been received. Twenty-five years ago, no one could have imagined that Air India (now merged with its country cousin Indian Airlines), the public’s darling and the mascot of the home-grown public sector, would find no takers.

That was the time when Air India was the nation’s pride ~ an internationally renowned airline of a developing country. At that time, not many Indians could afford to fly but people in general 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 whom they had met on flight. When it was flying high, Air India helped a number of airlines of Asian countries like Singapore and Malaysia to come up. Airlines of Gulf nations were set up by the expertise of Air India personnel hired privately.

Alas, the golden days are long gone. Dubai, not Delhi or Mumbai, is the hub for Indian flyers. Briefly put, with time, our crown jewels have turned into glass. The fall of Air India has coincided with the rise of private airlines. While the behemoth, hamstrung by bureaucracy, could not match the agility of smaller players, crony capitalism also played an important part in Air India’s downfall. This is hardly surprising; State enterprises offering consumer services like BSNL and MTNL are in a similar position for similar reasons. Even a cursory inquiry into the downfall of Air India reveals many skeletons in the cupboards of the Government and the airline.

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. This was in addition to the hugely innovative steps taken by the leadership of Air India to hobble Air India. The top bosses completely abandoned Indian interests while signing bilateral agreements which have ensured that foreign carriers dominate Indian skies and the share of Air India is steadily falling in overseas travel.

The merger of Air India and Indian Airlines, initiated in 2007 and completed in 2011 was the last nail in the coffin of both airlines. Pre-merger Indian Airlines was making modest profits while Air India was making modest losses but neither of them required government largesse. Now, Air India looks to the Government even for money to pay salaries. As of now, the combined debt of Air India and AI Express is Rs 60,074 crore. Obviously, no advantages flowed from the merger of Air India and Indian Airlines; economies of scale and shedding of redundant workforce did not happen, probably because Indian Airlines and Air India flew different kinds of aircraft making integration of pilots and ground staff difficult.

Moreover, powerful staff unions ensured that surplus staff was not retrenched. Significantly, even pilots qualify as ‘workmen’ under the Workmen’s Compensation Act, 1923. Air India reported a loss of Rs.7,620 crore in financial year 2018-19. This would seem surprising because Air India has a captive passenger population ~ all Government employees are required to travel by Air India on official work as also while availing Leave Travel Concession. 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 generally 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 those of other airlines. Despite all these obvious pluses, Air India is the airline of last choice for passengers because bad management negates all advantages of flying Air India. To recount: AI has the worst time slots; its flights often take off and reach at inconvenient times, if you want to travel from one small place to another via a hub like Mumbai or Delhi you would find that your flight reaches much after the departure time of the flight to your destination town. Air India 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 Air India staff completes the AI flight experience. There are myriad passenger complaints on the Air India page on Facebook, to which the airline has not bothered to reply. No wonder that Air India planes fly with empty seats while most other airlines report more than 95 per cent passenger load. There was a time when Indian Airlines was the only airlines flying across Indian skies and getting a seat, except when you had booked much in advance, depended on the goodwill of their staff. Despite a sea change in the aviation landscape, the arrogant attitude of Air India employees has refused to mellow down.

Passengers avoid Air India because its employees are still steeped in Indian babu culture looking down on passengers as supplicants. The Government tried to revive Air India by appointing a new Managing Director but probably his remit did not include taking on the powerful Air India unions or trying to change the work culture of the organisation. Two years ago, the Government initiated the sale of Air India but no buyer came forward. There were two stumbling blocks. First, the government proposed to retain 24 per cent stake in Air India, which would have given it a say in all major decisions of the new owners. Second, no staff could be retrenched by the new owner. This was a major sticking point because Air India has 16,077 employees, around 150 employees per aircraft, as against 70 employees per aircraft for a profit-making airline like Indigo.

Permanent employees entitled for gratuity and pension number 9,617. The current offer has more chances of success because the Government proposes to sell its entire stake in Air India but it is not clear if the buyer would be allowed to get rid of excess or undesirable staff. Rather, the Government has indicated that across the board retrenchment would not be allowed and the new owner would have to pay retirement benefits at old rates. While wishing the Government well in its endeavour to sell Air India, one wonders if it can allay the concerns of a rational buyer viz. how can he earn profit from the same aircraft and same staff that has brought Air India to its knees, despite unstinted Government support. As Einstein had famously said: “Insanity is doing the same thing over and over again and expecting different results.”

(The writer is a retired Principal Chief Commissioner of Income-Tax)