Bailout not the cure for Maharaja’s Air sickness

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Instead of throwing good money after bad, the Centre should take corrective measures to fix Air India, which suffers from systemic weaknesses

By Jitender Bhargava

Illustration: Anand Naorem
Illustration: Anand Naorem

AIR INDIA and Kingfisher have been for some time now facing a crisis of a similar kind — financial, threatening their very survival. Both airlines had thus been looking up to the government for support. However, when the Cabinet Committee on Economic Affairs met last week, it took a decision that will cost the government in excess of Rs 30,000 crore and give Air India a lifeline, but deferred a decision on FDI for airlines that Kingfisher has been seeking but would not have cost the government a single rupee.

The bailout for Air India has naturally evoked a riotous response with many not only describing it as throwing good money after bad, but also discriminatory. Why should the government go overboard with respect to one airline and deny the same to another? There is, however, some merit in the government extending financial support to Air India as a significant chunk of the losses that the merged Air India entity has incurred in recent years has been due to mismanagement and flawed decisions for which the government ought to take the blame.

It is undeniable that Air India has been witnessing governmental intervention and interference at all stages — appointment of the board members and chairman, and termination of their tenure midway; formulation of all major policies, and then changing them abruptly; decisions on important issues like aircraft acquisition and merger without understanding the full importance, implication and affordability, et al.

However, as not all of Air India’s losses can be attributed to the government and its actions, the financial package should have been selective; it need not have covered losses suffered on account of all-round operational inefficiencies such as poor product and customer service, low aircraft utilisation, virtually non-existent marketing and a dismal track record on human relations — both due to incompetence of management and recalcitrant unions.

Whether Air India is able to weather the turbulence and emerge as a strong competitive airline after the bailout, or continue to exist on government doles is a million dollar question that needs to be answered now, rather than in 2020 by which time all of the Rs 30,000 crore would have been spent. To find a credible answer, one only needs to review Air India’s performance in the past two-three years after its pitiable financial situation became public knowledge. One would have logically expected the government and the Air India management in such challenging circumstances to have initiated a series of measures to stem the decline by taking corrective action. However, nothing of this kind was attempted, thus making Air India lose further on all counts — depletion in revenues, loss of market share, burgeoning of losses, etc.

Hope for any improvement in AI’s performance is likely to remain a pipedream

Civil Aviation Minister Ajit Singh has stated that the release of funds will be incumbent upon Air India achieving stipulated milestones — a welcome feature, but few are taking this condition seriously. It would have been better for the government to have simultaneously addressed the systemic weaknesses that exist in Air India, and which have historically hindered good performance. Unless these are overcome, attainment of milestones will be an impossibility.

Some of the corrective measures that need to be taken for registering even a semblance of improvement are: reconstitution of the board of directors with individuals who are knowledgeable and can guide the airline’s destiny (not bureaucrats), a CEO who is a professional and has the requisite commitment and ability (not an IAS officer); induction of qualified and experienced senior management personnel in key positions to replace those who are now donning them by virtue of mere seniority; employees who are motivated enough to deliver and are not in their jobs only because Air India is a sarkari company, and the multiple trade unions, which should prove themselves to be an asset and not a liability.

However, with no structural changes having been contemplated, hope for even a modest improvement in Air India’s performance is likely to remain a pipedream.

(The views expressed in this column are the writer’s own)

Jitender Bhargava is a former executive director, Air India.
jitenderbhargava@hotmail.com

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