Air India: Delayed Decisions and Wrong Calls

CAG's performance audit of Air India ignores the effect of delayed decisions and wrong calls

Published: Sep 29, 2011 06:44:26 AM IST

Updated: Sep 29, 2011 08:09:33 AM IST

The Comptroller and Auditor General of India’s performance audit of Air India says the hasty order for Boeing 787s and the decision to allow foreign carriers more flights are responsible for the airline’s losses. It ignores the dozens of wrong calls and missed opportunities that have brought the airline down.

Strengths Never Leveraged

AI Engineering: Excellent maintenance facilities with airplane, engine and avionics shops. Only such certified outfit in the entire sub-continent. The hangars and 5,000-strong team of trained manpower was never used optimally.
AI Cargo: Half a century of cargo operations around the world. With domestic linkages, it could have cashed in on India’s growth. Lost to Emirates, Cathay and Lufthansa.
AI Ground Handling: Handled dozens of foreign airlines. Marginal investment, training and customer orientation could have made it impossible to beat.

Poor Leadership

Since 2003, Air India has been run by IAS officers with no experience of running a complex, global business. The last incumbent, Arvind Jadhav, was secretary of industries in Karnataka and his predecessor V. Thulasidas was the chief secretary of Tripura. Rivals like Jet Airways hired expat management. The AI chiefs looked to their super boss, the secretary of civil aviation, for direction.
Ministers Ananth Kumar, Sharad Yadav, Shahnawaz Hussain and Praful Patel, who were at the helm when the decline was the steepest, have never been able to put the airline on the course to recovery.

People Trouble

Union Grip: 19 unions with political links have wrested control from the management over the years.
Bad Agreements: Lopsided agreements make it impossible to push for higher productivity.
Poor Work Ethics: Over the years, little pride in working for the airline and a sense that the politicians (and management) are responsible for all problems. Pilots struck work in May 2011 for more pay, even as accumulated losses were touching Rs. 20,000 crore.
No New Hires: No fresh hiring (except pilots and crew) has taken place for about 18 years.

Wrong Commercial Calls

New Planes: Brand new, well-fitted B777s and A320s could never be leveraged for higher fares. The non-stop flights connecting India and the US had the best timings but flights were losing money until recently.
Low Fares: Lost its image for business and first class passengers. Began morphing into an airline focused on labour traffic between India and the Middle East.
Wrong Routes: Wrong calls on routes with many of them being operated because of political reasons.
Merger Mishap: Integration between AI and IA is still a distant dream.

(This story appears in the 07 October, 2011 issue of Forbes India. To visit our Archives, click here.)

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Comments 13

Joseph

The CAG's comment on the decision to allow foreign carriers more flights are responsible for the airline's losses stems from the fact that if the Government of the state is in the business of running an airline (and not end up subsidising it with tax-payers money) it is important to sign bilaterals in conjunction with the business strategy of it's airlines and I include Air India, Jet, Kingfisher, et al. When we wish to promote our two national gateways in Mumbai and New Delhi, what justifies increasing seat capacity to/fro only Dubai from 12000 seats to over 55000 seats per week in the past six years from all international airports in India !! No the whole of India does not only travel to Dubai for work or holidays but it was evident to the mandarins in the Ministry that the 6th freedom traffic is what Emirates was fishing for to carry beyond Dubai... and they gladly signed on the dotted line. The signatories include senior executives of Air India too: Ms S.Lalwani, Executive Director-Planning, Mr Prem Sagar-Asst Manager-AI, Mr Shyam Sunder-DGM-Indian Airlines and Mr Rajan Malhotra-Indian Airlines. And today we hear them complaining about how they were robbed !! Kindly refer to the Bilaterals with UAE-Dubai dated: 10-May-2007 in the DGCA, India website. WILFULL NEGLIGENCE who compromised National Assets. Needless to say more, the same people are today submitting turnaround plans for governments equity infusion to hopefully erase the pains inflicted upon thirty-two thousand employees and their families! It's job well done by the CAG.
on Oct 1, 2011
- Jasmine Chandran
  
  Joseph has rightly brought out how the airline has been plundered from within and outside, and continues to be. Guess it's no mean task for the Government to turn around Air India. The rot is deep within. Privatisation is probably the only way with Government support from outside like Singapore, Emirates, British Airways and Lufthansa.... Is the Government listening?
  on Oct 1, 2011
Ratan Shah

Some learn by mistakes, some by emulating the best practices and some by being original & ingenous, i.e. Out-of the-Box thinking. Regreattably in AI, despite the sinking signals being there from 2005 onwards, nothing was done & strangely NOTHING IS BEING DONE. Only thing that has been done by the new CMD is Put a Smile on the face of every employee. Hurrah ! This is an official ruling to the bloated, overpaid, unproductive staff strength- Do as you please- no holds barred. Even now the opportunity to use the Govt Funding to trim down staff strength are nowhere in the horizon. A progressive organisation being aware where the shoe is pinching would have immediately come out with a VRS & CRS to cut the flab in general admnistrative areas. But NO ! This subject is taboo with the government ! Cut down loss making routes- but NO ! Freeze all promotions and cut futile expenses-but NO ! An administrator administers the policies of the bosses & the establishment. While the Manager-implements the policies and actions of his own based on business compulsions. An administrator sits in a chaffeur driven car- leaving his reach to destination on the driver. A Manager-drives the car himself, all the time being alert to what route & course correction he should take to reach the destination fast, economically & expeditiously.
on Oct 1, 2011
- Cuckoo
  
  Ratan, you've highlighted what's arguably the biggest problem for Air India, one that we've covered this in the story too. The airline has had very ineffective leadership. After Michael Mascarenhas and Mr Gogoi, there have been no airline professionals at the helm either. Over the next few years a crisis in mid and senior level management may emerge, as there has been barely any fresh recruitment. VRS and freezing promotions have been tried several times, but the problem is now much bigger and needs more drastic action.
  on Oct 1, 2011
Joseph

As an employee of the ailing airline, one is yet to see any visible action taken by either the management, the new CMD or the Ministry of Civil Aviation... If amputation is necessary, so be it....let's not be perpetually in the ICU and then end up in the mortuary !!
on Sep 30, 2011
Ratan Shah

Despite CAG pointing out, corrective action to stem the mounting losses of AI, as a sovereign authority of the country, it is regrettable, that the Ministry & the Management instead of giving COGNIZANCE to these vital inputs, is engaging in debate on the CAG reports veracity. They are not willing to implement suggestions. The CAG has suggested total ban on free travel of the employees. Though this is a little radical, yet AI NEEDS TO STOP ALL FREE TRAVEL TO ITS EMPLOYEES IN THE PREMIUM EXECUTIVE CLASS. This facility to the employees is pulling down the exclusivity of AI's Ececutive class brand, and high class premium travellers do not want to travel or patronise AI Why is AI not doing this, despite knowing the benefits. Because it fears the backlash from the unions & the employees. How can AI progress ? these are just simple examples ? The CAG & Govt must insist on implementation of these audit findings rather than playing safe in these difficult financial times.
on Sep 29, 2011
Brian Nelson

Great to see Cuckoo Paul's stories! Top-notch as always.
on Sep 29, 2011
- Cuckoo
  
  Danke Brian... As they say, watch this space for more!
  on Sep 30, 2011
Anil Kumar

Oops!!! The Comptroller and Auditor General of India was in the North Pole till recently and found the global warming hitting them hard for comforts, only to return, mislead & haunt everyone. How they woke up last night to point in such dramatic form and fashion on their performance audit of Air India - pointing the hasty order for Boeing 787s and the decision to allow foreign carriers more flights are responsible for the airline's losses. Are they trying to run and dictate the bilateral agreements in place with soverign countries or are we to go back to the old monopolistic approach - We can't manage our business nor allow anynone competent to enter the business. Currently the end user is not being victimised for lack of choice - is that a bad precedent set forth by respective governments - why name individual ministers - is there an agenda behind highlighting Ministers Ananth Kumar, Sharad Yadav, Shahnawaz Hussain and Praful Patel Do we know how to use those 787 orders in maharaja's favor yet still make a fortune? Maybe they need to understand the industry better, or find time to learn from successful network/legacy carriers. Too many cooks spoil the broth!!!!!!
on Sep 29, 2011
- Cuckoo
  
  Thanks for your comment Anil. It does seem strange to pin the blame for Air India's inefficiencies on liberalization. The jury is still out on the 787s, the first just got delivered to ANA last week.
  on Sep 30, 2011
Purna

Who will give the answer... But lower category peoples are suffering.
on Sep 29, 2011

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