AI = Ailing India. How? Why?

Air India, once the 'Maharaja' among airlines, is today reduced to the status of a dying pauper, begging for oxygen to revive itself. S.Narendra , a former Spokesperson of Government Of India and Information Adviser to PM, traces the trail of AI's flight to commercial disaster

   AI stands for Ailing India. Air India’s s sad plight now in many ways tells us why India is unable to take off to its full potential. Politico-bureaucratic mismanagement is exercising a severe drag effect not only on AI but on a resurgent India.

   For proof of this one needs only to read the AI story, as told in the in-flight magazine of one of the top airline brands-SIA or Singapore Airlines.

   Recalling how SIA brand was groomed, this magazine tells us proudly that SIA (along with Malaysian Airlines)management was in its growing up years entrusted to one of the stars of global aviation in the 1960s. That star was AI, rightly carrying on its tail the logo of the Maharaja. SIA and AI were both government owned. SIA emerged global airlines leader. AI that was the envy of competitors is now begging for oxygen. We all know why and who is responsible.

   Now coming to AI in decline, asking the government for Rs19000-40,000 crores bailout. An outraged corporatized media has demanded its sale, knowing full well that AI now is a cheap pick in the market. How was AI pushed into such a ditch? The Comptroller and Auditor General’s report (2010) offers some but only latest set of reasons.

V Kishore Chandra S Deo

The government, along with the management, forced a hasty merger of Indian Airlines with Air India after ordering a fleet of aircraft from Boeing and Airbus when it should have been the other way round. AI was forced to purchase planes worth $9 billion (Rs 45000 crore) with only Rs 325 crore of equity, a decision that should have sent alarm bells ringing in the ministry of civil aviation and Planning Commission, according to the report. Air India and the ministry, the report goes on to say, also took some decisions backed by logic and data that subsequently proved wildly optimistic. For instance, the airline suddenly decided to more than double its orders for new aircraft to 68 in 2004 . "This increase in numbers does not withstand audit scrutiny, considering the market requirements obtaining then or forecast for future as also commercial viability projected to justify the acquisition. The acquisition appears to be supply driven (manufacturers lobby)" the report said.

   The parliament’s committee on public undertakings (COPU) endorses CAG. COPU headed by Congress leader V Kishore Chandra S Deo, now a central minister, bluntly said there was "no justifiable explanation for this abrupt haste" to merge the two carriers. "The so-called merger is a kind of marriage between two incompatible individuals having wide variances with hardly any meeting ground," it said. The two ‘merged ‘airlines continued for long to operate separately, without a common ‘code’. Now demerger opinions have gained momentum.

   For over ten years AI was denied permission to replace, let alone expand fleet. In 1996, the Public Investment Board sitting on AI request for fleet replacement told a meeting of the CCEA (the relevant cabinet committee) that if AI was allowed to acquire new fleet, it would become unviable in the event of its sale (this PIB view given verbally).But there was not even a suggestion before the government at that time for AI disinvestment! With depleted fleet, AI was forced to cede profitable routes to competition. CAG characterizes the ceding of routes to other airlines as totally one-sided. The parliamentary panel (COPU) also expressed surprise over AI stopping many profitable routes or changed their schedules that have benefited other airlines. Indian private airlines who are complaining now against AI were also gainers from this government generosity. One does not know what goodies were traded by lobbies working against AI.

Preventing AI from aircraft acquisition had pushed up the number of employees per aircraft to unsustainable levels for which the blame was put on AI. How employees numbers expanded and who pushed it to unsustainable level is well known.    The aircraft makers keep making self fulfilling statements of fleet requirements by Indian civil aviation, intended to influence the stock market back home.‘Projections of accelerated growth in India make it an attractive market for aircraft manufacturers. Airbus estimates that Asia will be the largest market for airplanes in two decades from now, said Kiran Rao of Airbus, when the global recession was round the corner. Boeing points man in India Keskar was wise after the event and told the media: “In fact, we have been saying that. While the growth was very good about three years ago, it (Indian airline industry) did bite more than it can chew.

Kiran Rao

Preventing AI from aircraft acquisition had pushed up the number of employees per aircraft to unsustainable levels for which the blame was put on AI. How employees numbers expanded and who pushed it to unsustainable level is well known.

“How did AI or IA or Indian Airlines CMDs who come through the civil service revolving doors treat their unfamiliar new assignment? IA wanted a new makeover in 2005.And heading an advertising agency, I was making the ad pitch to IA. I wanted to know whether it was a good idea for AI to totally ditch its colours and logo and investment in building this brand identity for a new one, especially in view of suggestions in official circles of a possible merger of the two airlines. Without responding to this query, AI spent crores in changing its identity.”

   CAG has more to say on how government representatives treat AI/IA. The government directors on AI board failed to notice persistent weak financial position, low revenues, high debt and paltry equity. CAG also finds it exceptional that rules were changed to confer extraordinary perks to be given by AI/IA to ex-CMDs and such other officials by an ailing firm.

   The CAG report offers a very good case study for management education students by highlighting how a good business courts disaster when purely commercial decisions are influenced by extraneous considerations. The report urges the government to let AI function as a business entity without interference from its administrative ministry.

   AI, BSNL, SAIL and several others PSU’s have been recognized as ‘Navaratnas or precious gems. Their very worth makes them targets for political-bureaucratic shenanigans, reducing them as candidates for dole and eventual sale, as observed by Arun Shourie, a former minister for disinvestment. COPU recommended fixing of responsibility on "agencies and individuals" who took “whimsical" decision (s) relating to AI and sought "suitable action". One more committee report that reminds one of the words of Prof Parkinson: ‘a committee reminds me of a visit to the toilet. First there is a sitting, followed by a loud report. And then the matter is dropped.’

   One has to leaf through the in-flight magazine of Singapore Airlines, a brand that is the envy of competition. The inflight magazine recalling how SA became such a star, tells us that SA (along with Malaysian airlines) were entrusted to Air India for managing it in its initial years, because AI was a Maharaja among global airlines.