How to put the Maharaja out of his misery
The national carrier is ready for privatisation. Will it lead to a fundamental change in its corporate culture?
The imminent sell-off of Air India (AI) has evoked a wave of nostalgia, particularly in people of the older generation. There was a time in the 1950s and 1960s 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 then, 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 whom they had met on flight. When it was flying high, Air India helped a number of airlines of Asian countries, such as Singapore Airlines and malaysian Airlines, to come up. Airlines of gulf nations were set up with expertise from 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 that is half horse and half human, till recently portrayed on the logo of Air India aptly describes Air India, which is an entity that’s half government and half private business: beautiful, but not of much use to anyone.
The reasons for the downfall of Air India are myriad – too many to be enumerated in a magazine article. Suffice it to say that the top people 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 a meeting of the commonwealth heads of government; the Sultan of Brunei was the only other leader 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 leadership of Air India took hugely innovative steps 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 keeps falling steadily in overseas travel. Then there was the hare-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 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 ₹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 last nail in the coffin of the national carrier. No specific reason was given for the decision to merge the two. It was probably felt that the move 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, even after infusion of ₹25,000 crore by the government. As of today, Air India has a net worth of around ₹25,000 crore but has liabilities of around ₹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
Trying to rejuvenate Air India without a fundamental change in its corporate culture would only amount to throwing good money after bad.