Turning The Tide

With all-round improvement in performance, higher efficiency and better yield management strategies, Air India hopes to be out of the red by the end of the current financial year

For over half a century, Air India and its domestic constituent erstwhile Indian Airlines (renamed as Indian), had enjoyed monopoly status with the best of aeroplanes and routes. As government-owned entities, in a centrally controlled socialistic economy, the airlines served both a national and social purpose. Market share and profitability for either of the airlines were really never issues of concern. However, economic reforms and liberalisation introduced in the early 1990s changed everything. While Air India’s operations in the international segment dominated by the highly efficient foreign carriers had generally never been profitable, in the new free market economy, the domestic carrier Indian could no longer bask in the comfort of government protection. It was now pitted against the private airlines that were aggressively changing the paradigms of the Indian airline industry with quality service at appreciably lower cost and far better efficiency. As departments of the Central Government, both the national carriers were weighed down with the ills associated with the public sector— labour dispute, overstaffing, inefficiency, poor discipline and low productivity. Air India’s woes were also compounded by exploitation by its owners and the lack of professional management.

The mounting losses being untenable in the prevailing economic environment, it was evident that both the national carriers were headed for serious financial crisis threatening their very survival. In 2007, following the universal practice of merger amongst companies in a financially turbulent corporate world in India and abroad, the government took the momentous step to merge the two entities and form the National Aviation Company of India Limited (NACIL). Aircraft of the merged entity were to fly under the brand name Air India. The purpose of the merger was to synergise technical and human resources as also to coordinate operations with the aim of reducing expenditure, improving yields and maximising profits. Advocates of the merger painted a very rosy picture visualising profits of Rs. 1,200 crore by 2010. The logic was perfect and the concept appeared flawless. However, it seems that the plan for merger was not accepted by the employees in the two airlines. Commenting on this issue, in a recent TV interview entitled “Devil’s Advocate”, Civil Aviation Minister Praful Patel told Karan Thapar, “There has been an opposition from within and a systematic effort to see that the merger does not succeed.” The employees of the two airlines did therefore succeed in sabotaging the merger plan at least for the time being and the net result was that the NACIL (name changed to Air India with effect from October 2010) continued to slide down the slippery slopes of financial disaster with cumulative losses nudging Rs. 15,000 crore (about $3.2 billion), apart from the a massive debt burden on account of new acquisitions.