THE CHIEF executive officer of the International Air Transport Association (IATA), the global apex body for civil aviation, Giovanni Bisignani, was once asked at a press conference about his prescription for turning around Air India. The Italian whiz just shrugged and said “Well I don’t have any. I don’t know about others.”
That shrug turned out to be prophetic. Today, the carrier has lost market share, credibility and most importantly, its customers (AI’s market share has now slipped to as little as 15 percent, from 50 percent in 2003).
With the ongoing pilots’ strike entering the seventh day on 3 May, and no solution in sight to the impasse, the airline has now become a fit case for being referred to the Board for Industrial and Financial Reconstruction (BIFR).
“Air India’s losses have been soaring — up from Rs 2,226 crore in 2007-08 to Rs 5,548 in 2008-09 to Rs 5,551 crore in 2009-10. But the Comptroller and Auditor General of India contends that the airline has underreported its losses which actually were about Rs 8,500 crore in 2009-10,” a senior finance ministry official said on condition of anonymity.
Incidentally, the erstwhile Air India and Indian Airlines had separately posted a profit of Rs 12.43 crore and Rs 63 crore respectively in 2005-06 before their merger, but started bleeding profusely the very next year.
As it stands, the airline’s cash flow is Rs 36 crore per day while the outgo is Rs 57 crore, which works out to a total loss of Rs 21 crore per day.
Even after completing two years in office, AI’s chairman-cum-MD Arvind Jadhav has not been able to get the airline close to financial well-being, or placate his 30,000 plus strong workforce.
In the current crisis, the Ministry of Civil Aviation has finalised a draft Cabinet note on trifurcating the State-run carrier into three separate entities. “Once the trifurcation is approved, Air India will continue with its core business of flying; the maintenance, running and operation (MRO) would be a separate business and look at aircraft maintenance for other airlines also. The third unit would look at ground handling. All three units would be revenue-generating independent entities,” says an official from the airline.
Of the 30,000 plus employees, about 13,000 will be transferred to the different MROs that Air India has across the country. Another 7,500 employees would be shifted to the ground handling unit.
“This would help us significantly bring down the employee-aircraft ratio, which is about 276 employees per aircraft now. The global standard is about 70 employees per aircraft,” says the official, adding that the MRO unit would earn about Rs 2,000 crore per annum.
ACCORDING TO sources, the airline is also in talks with a consortium of public sector banks to convert its high cost debt into low cost debt. The banks in turn have suggested that the airline’s borrowings be converted into equity and handed over to the banks so that the holding pattern of the airline continues to remain with the government and the airline retains its public sector character.
“Even if we continue to infuse equity endlessly ( Rs 2,000 crore has been pumped in till date to keep the airline afloat) we are wasting tax payers’ money,” says a finance ministry official.
The Delhi High Court, meanwhile, has summoned nine pilots from the Indian Commercial Pilots Association (ICPA) to court on 12 May. But the ICPA is adamant. “We have no faith in the management. We will fight to the finish and are willing to go to jail. Our families will fight for our cause,” an ICPA member told TEHELKA.
Samiran Saha is Assistant Editor, Business, with Tehelka.