Opinion Rep-Air India
Any bailout plan without plans for privatisation just wont work
The government is said to have approached Ratan Tata to head an international advisory board to revamp and revive Air India. This is supposed to be a prelude to what is expected to be a government bailout. While this is a welcome step,the moot point is whether the boards recommendations for the revamp of Air India will be accepted in toto before the bailout.
Both Air India and Indian Airlines had their finest management set-up in the 70s Air India under J.R.D. Tata and Indian Airlines under Mohan Kumaramangalam and later Air Chief Marshal P.C. Lal. The decline in Air Indias lofty service standards began with the summary replacement of J.R.D. Tata during the Janata period. All through the 80s,when Rajiv Gandhis government took the far-reaching decision to induct A320s,both airlines were making profits; both their managements were staffed from within the airlines by managers who understood operating nuances.
It is only over the last 15 years or so that they have had a CMD or at least an MD from the ubiquitous IAS; and since 1998,when the then NDA civil aviation minister had the common board of the airlines sacked overnight,the boards have had only 5-6 people,mostly ministry bureaucrats. Little guesswork is needed as to where to assign responsibility for the rot.
Instead of setting up an international advisory board,Praful Patel should get a few eminent management professionals to probe the failure of the merger exercise (of which he was an ardent advocate),and where and how the expensive projections,done by external management consultants,went so disastrously wrong.
But the fact is that Air India has to be totally overhauled in terms of its organisational structure,its rules and regulations as well as financially. Voluntary retirement or optional leave without pay is unlikely to make a great difference to the coffers; the proposal has been mooted before,and few people took it up. Nor will steps like disallowing senior executives from travelling in executive class help; given the airlines present pitiable service,it has generally been shunned by regular business-class passengers on both domestic and international flights.
No,Air Indias revival will undoubtedly call for some very harsh,unpalatable,but unavoidable measures.
First,compulsorily,not voluntarily,retire all employees above the age of 55 years with suitable notice,as a one-time exercise to reduce overall flab. Thirty-four thousand employees are far too many for an airline with Air Indias fleet strength; this step will automatically improve the overall employee productivity of Air India vis-à-vis other international airlines. Terminate the services of employees who have been retained on contract beyond 58,possibly at political behest.
Second,significantly reduce the number of senior posts. There are nearly 40 Executive Directors and over 100 General Managers in the merged Air India; can this be even remotely justified? Third,increase the productivity of all employees including engineers and pilots by enhancing productivity parameters to international benchmarks.
Fourth,close down the multiple booking offices of Air India and Indian Airlines that continue to exist in big cities. Also move out functional executives (excluding sales and marketing) and their support staff from the city offices to the airports. Let out space in Airlines House at Delhi and Kolkata,as also the Air India building in Mumbai,all of which are prime rental property.
Fifth,ensure that independent directors are able and qualified professionals and not film stars and politicians,as in the past.
Sixth,rework capacity requirements afresh and either defer new aircraft deliveries or cancel orders to stagger the financial burden. Also,review aircraft on lease. There is no justification for the heavy monthly lease rentals being paid on 18-20-year-old aircraft,which were sold and leased back by the airlines in 2007 to raise short-term funds,nor for the fairly large number of expatriate pilots hired on contract.
Lets also amend labour laws to prevent pilots earning over Rs 4 lakh a month and engineers earning over Rs 2 lakh a month being categorised as workmen. A determined effort to minimise (eliminate will be an impossible word,even Napoleon would admit),ministry interference,permitting the management to take decisions as per market dictates,would go a long way.
Eventually,privatisation is the only solution. Given its inherent strengths in terms of assets,infrastructure,skills,etc partial privatisation or disinvestment will simply not work; that will be more like a distress sale. Increasing Air Indias equity capital might be overdue but any bailout plan without a long-term perspective of privatisation will,at best,provide temporary relief.
The writer retired as Director-Finance of Indian Airlines
express@expressindia.com
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