Tuesday, July 07, 2009

Air India - Chickens coming Home...

see previous articles here and here

Finally the chickens are coming home to roost as Air India, the National Airlines that should have been brought to a level that it could have become the pride of the country, has been brought to the brink.

The Airlines is even having to delay payment of its monthly wage bill to the employees and the situation is not about to get any better soon unless the Government is made to bail it out. The employees who, incidentally, are no credit to their organization, are up in arms.

Agitating Employees
Red Flag for the Employees - too late to change, get ready for the sack

Sadly, this turn of events was visualized as early as 2005. Exactly a little over four years ago, Prajatantra had said almost prophetically (
see here):
“It remains to be seen whether the Government considers itself capable of achieving these tasks or is only delaying the process of disengagement and disinvestment. The country has lost heavily over the years by way of lost opportunities, due to inept management by the Government. Huge resources invested over the years have not yielded the desired results. It is now time for accountability. It would simply not do to commit further public resources and THEN hand over the assets and/or reins to outsiders on a platter – a possibility, which is already being forecast by some.”

Another article around the same time (
see here) further highlighted the shameful positions of the national airlines amongst the airlines of the world, once again hinting that the airlines could disappear in the oblivion without all out efforts.

Praful Patel - The man on the spot

And the man who was fully aware of the serious situation and expected to guide and direct these efforts to pull out the Airlines from the morass was the Minister of Civil Aviation. After all, the present condition of the airlines is not merely because of incompetent managements and employees but also due to lack of vision, inadequate responses and interference of the Ministry without any accountability - problems which only he could deal with.

Indeed, when Air India’s massive aircraft order of US $ 7 bn. to Boeing became controversial, Praful Patel casually shrugged it off saying that he had to think of future planning! (
see here). It was a strange statement, coming from the Minister responsible for the entire Civil Aviation sector, that an order for Rs. 33,000 crore was a petty matter, notwithstanding that Air India would have to justify such a huge capital expenditure by its earnings. Observers of what was happening saw in his statement, a wish to avoid an awkward discussion with regard to the contract. Taking his remark that he “had to think of future planning” at face value, by now he would have personally ensured in five years that the face of the national Airlines was completely changed to place them on a sound footing to regain leadership and remain competitive for the long run, rather than having to say now that “the management had complete freedom to act”.

Freedom to act

And what was his grand plan for the National Airlines?

He first changed the name of Indian Airlines to “Indian”, a part of a supposed image make over - Go for cosmetic face change if a real change from within is not possible. After all, Swissair (which collapsed earlier) changed its name to “Swiss”, so why not? It was a decision in the abstract, just spending a lot of money on the re-branding related activities – logos, designing, painting, advertising campaign and the like. The Minister grandly proclaimed: “We're sending out a strong signal that we're ready to take on private airlines. We can do it." (Dec. 2005) Since the name was changed, other airlines were allowed and indirect favors given to enable them to merrily go about increasing their share. Indian, previously a monopoly and with a half-century head start, ceded over 80% and now has only 17% of the domestic market. That is the situation of the Airline that has full Government backing and a Minister who is engaged in “future planning” (sell-out?). About the International Operations of Air India, whatever was said in the earlier articles has changed only for the worse.

The second measure was to form NACIL in 2007 to integrate Air India and Indian to supposedly take advantage of synergies between the two. With this plan, it was also understood that the name “Indian” would disappear, after having wasted huge resources in the re-branding exercise. In a classic case of putting the cart before the horse (see the Maharaja on the horseback
here), NACIL was formed without having any firm road map at all. This is evident from the fact that the so-called integration has not happened except perhaps the synergies of inefficiencies. A Business Process Re-engineering Consultancy RFI (Request for Information) was published as late as November 2008!

Other than these two measures and the earlier decision to place a “petty” order for Boeing aircraft, there is very little to show for what the Honorable Minister did in his previous stint, except uttering inanities and asking the management of the airlines to shape up. Most of the time of the ‘thinking for future planning’ seems to have been taken up in dishing out lucrative contracts for airport construction and maintenance. This is not to say that airport development is not equally important but retrieving the situation of the airlines was of prime importance as well. Instead, it has been allowed to deteriorate further which is hardly something that can be brushed aside.

Admittedly, there are immense problems with the National airlines, not too easy to solve, starting with employees unwilling to change with the times. But that is what he had set out to do. He should have acted in time, with urgency and done everything necessary including sacking of recalcitrant and useless employees. He did not do this.

Incidentally, the Honorable Minister also had a media blitz advertising campaign “Wings of Progress” designed with his picture prominently displayed lest people forget about his wonderful contribution to the growth of civil aviation in the country. Domestic Airline companies (including Air India), Airports Authority and airport contractors dependent upon the blessings of his Ministry, were made to fork out about Rs. 22 crore for the Campaign (see here).

The employees - major contributories to the inefficiencies

The Employee Unions have been pointing fingers at the Ministry under his charge for deliberately allowing a situation to be created whereby the airlines would not remain viable. This perception is getting wide spread as it is unthinkable that the Ministry which would not feel shy of interfering in the affairs of the airlines over relatively smaller issues would not exercise its authority to set things right, particularly if as is made out, the airlines management was not able to prevent a further slide. After all, it is the Ministry that is finally responsible for ensuring that the national assets under its charge are not allowed to go waste by neglect.

Air India is believed to have incurred losses last year in excess of Rs. 4,000 crore and is said to be looking for infusion of equity, soft loans as well as grant. At long last, the Minister has announced that a restructuring is planned to happen within 30 days. This would involve an overhaul of the airlines with a board of distinguished outside directors and also a multinational management team starting from the COO. To deflect responsibility, he has once again said that Air India must shape up and become leaner and trimmer. To take such actions at this late stage suggests that in all likelihood this could at best turn out to be just a mock drill. The Minister may be looking for these new teams to pull his already burnt chestnuts out of fire or come up with the conclusion that the situation is irretrievable. In the end, the country may end up selling its national pride for a pittance together with Rs. 33,000 crore worth of new aircraft procured under a "petty" order.

It is true that the management and the indifferent employees of the Airlines are responsible for many of the problems over the years. They have no excuse for their inefficiencies and incompetence and must bear the consequences for their own faults even if it means losing their jobs. But there is also a larger issue involved that of the failure of the Ministry and the man at its helm to take timely actions. Therefore, a complete overhaul should involve not only the airlines but also the Ministry at whose doorstep the ultimate responsibility for the mess becoming messier really lies. If no action is taken on this score, it would mean continuing with lack of accountability, incompetence and apathy of the bureaucrats and Ministers for whom turn around, bail out or belly-up make little difference.