Cash-strapped Air India loses millions due to corruption, mismanagement

Cash-strapped Air India loses millions due to corruption, mismanagement

The cash-strapped airline has been losing millions of dollars due to corruption and mismanagement in the outsourcing of repairs to overseas vendors by its engineering department.

Cash-strapped Air India (AI) has been losing millions of dollars due to corruption and mismanagement in the outsourcing of repairs to overseas vendors by its engineering department. The government-owned airline has been made to shell out huge sums of money for repair of aircraft engines as the engineering department has failed to push through warranty claims properly and, at times, deliberately delayed follow-up action to allow the warranty period to expire.

Official records in the possession of Mail Today show that units of the engine electronic control system of the AI's aircraft kept failing merely five to eight months after being repaired. This works out to a mere 30 per cent of the expected service life of the unit after each repair. While these units were removed from aircraft in time, there were deliberate delays in dispatching the units to the premises of the vendor resulting in expiry of the warranty period.

Consequently, AI had to shell out around $20,000 at the workshop for each repair, which should have been covered by the warranty and not cost the airline a single penny.

Repeated efforts made by Mail Today to obtain the state-run carrier's version on these issues failed to elicit any response. Nobody from AI seems to have taken up the issue of the high rate of post-repair failure with the vendor even though this had been happening for several years and the airline kept losing money. "There are other duly approved vendors undertaking repairs of these units at cheaper rates and better life expectancy but no one bothered to explore the alternative options," a reliable source told Mail Today.

The high rate of failure of these units also led to cascading losses for AI as aircraft had to be grounded for repair frequently and hence could not be used for regular flights to compete with rival airlines, which have been eroding the market share of the national carrier.

AI's operational costs also went up due to the bigger inventory that had to be maintained for these parts due to the frequent breakdowns . According to sources, bigger inventory drains the airline of precious funds as every extra unit costs around $0.4 million. Since an unusually high number of units had to be kept as standby due to the repeated failures, the carrier had to incur undue expenditure running into millions of dollars.

On several occasions, the vendor denied warranty on the ground that the repairs done on previous visit were okay and the unit required repair in an area not repaired during the previous visit. However, according to the global best practice, it is not the repair but the unit which is certified each time.

The AI management should have carried a cost-benefit analysis of getting the engine electronic control unit overhauled with better warranty terms for the unit as a whole instead of merely the repair.

There are also serious irregularities in case of aircraft 'door strike' repairs as the engineering department switched from the highly reputed original equipment manufacturer M/s Adams Rite Inc. to M/s Top Cast, which was only a distributor for Adams Rite. Air India ended up paying more than twice the amount for the same repair to Top Cast.

The scrapping rate for parts was only 5.9 per cent when repairs were undertaken by Adams Rite while it shot up to 30 per cent with the switch to Top Cast. The higher scrapping rate meant that the airline had to spend extra money on buying brand new parts.

The engineering department did not follow proper procedures in choosing non-OEM Top Cast as the list of approved vendors on the Airbus Website, which includes companies such as Lufthansa Technik. AI insiders disclosed that payments to Adams Rite were deliberately held up by the engineering department to create problems while Top Cast was paid. Mail Today has in its possession correspondence from Adams Rite to AI repeatedly reminding the airline to make payments, some of which were delayed for over three years.

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