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Merger of Air India, Indian Airlines behind airline's money troubles

Merger of Air India, Indian Airlines behind airline's money troubles

Former civil aviation minister Rajiv Pratap Rudy says the merger of Air India with Indian Airlines is at the root of the airline's current troubles.

The biggest mistake relating to Air India was the decision to merge the erstwhile Indian Airlines into the flagship carrier. In 2007, in its report on the national carriers, Accenture had highlighted two factors as being responsible for their sub-optimal performance: an ageing fleet and the fact that the two existed individually.

The report had gone on to say that merger of the two entities and replacement of the ageing fleet would result in a profit of Rs 1,000 crore in the first year itself. Instead, in the three years following the merger in 2007 we have seen losses escalate from Rs 1,200 crore in the first to Rs 2,600 crore in the second to Rs 5,500 crore in the third. Each time, the management of the airline blamed the losses either on high fuel prices or intense competition or some other factor. The inescapable fact is that the airline today has accumulated losses of Rs 16,000 crore.

A new fleet was indeed acquired for the airline but with almost no planning. When an airline buys expensive aircraft such as the Boeing 777 that Air India acquired, route and fleet planning often starts six months before the aircraft start arriving. Instead, we had an extraordinary situation where Air India could not take delivery of three aircraft that had to remain parked at Boeing's factory for more than three months as Air India did not have enough trained pilots and cabin crew.

Rudy's take

  • Merging Indian Airlines with Air India was a big mistake
  • The strike by the pilots is an outcome of the hasty merger and unkept promises of the management
  • The management is more keen to teach the pilots a lesson than break the stalemate
  • Long-term solution lies in privatisation of Air India and professionalising its management

Again, when Arvind Jadhav took over as managing director of Air India he quashed the recruitment of additional cabin crew after the process for it had been nearly completed. As a result, another eight months were spent hiring cabin crew. During this period hundreds of flights had to be either cancelled or were delayed, not because of a lack of pilots or planes but because of a lack of crew.

Why did Air India withdraw flights from routes where it had good loads and why were these routes given to private airlines? I have nothing against private airlines, I even fly one (Indigo) to keep my hours. But this decision seemed to be aimed at weakening the national carrier.

The merger itself was hastily carried out. The pilots of the erstwhile Indian Airlines were promised parity with Air India pilots. For three years, nothing was done about it. Discontent built up. Praful Patel managed to keep it in check while he was minister, thanks to constant negotiations. After all, if you have been promised something, you do expect it. The pilots were in a position to protest, unlike the cabin crew, ground staff and maintenance crew. Now, instead of looking for ways to resolve differences with the pilots who are on strike, the Air India management and particularly Jadhav has decided to "teach the pilots a lesson". Matters have worsened to such an extent that even the executive pilots of the airline, who are management cadre pilots, have gone on strike in support of their colleagues.

When Jet Airways pilots went on strike a few years ago, I remember Naresh Goyal, the airline's chairman, talking to pilots and pleading with them to go back to work. But Jadhav has decided that he will not even talk to the pilots. Even the Delhi High Court has noted this fact. It appears that the management wants to make the pilots scapegoats for its successive failures. It was looking for an alibi and feels that the pilots have provided it one.

There is a severe shortage of trained commanders across Indian carriers and this has been forcing airlines to hire expatriates - often those with less than the best skills. If Air India sacks the striking pilots they can easily get jobs in other airlines within three months. But the pilots want to work for Air India. They, however, also want their dues. In Parliament, we were told that Air India loses Rs 20 crore a day. It is surprising then the management is fighting over what is essentially a matter of a few crores.

What can be done? We in the Bharatiya Janata Party, or BJP, have always argued in favour of privatisation of Air India. If not full privatisation, at least a partial one can be carried out through disinvestment. This will bring in funds to run the airline instead of the government constantly raiding taxpayers' money to feed it. The management of Air India should also be professionalised. The airline should not be allowed to become a training ground for officers of the Indian Administrative Service who have no knowledge of the aviation sector. Besides, there should be less interference from the ministry. I believe Air India is an important asset to Indian skies, and it has helped keep airfares in check. The moment the pilots went on strike airfares rose significantly. I hope this issue is resolved and the government takes some good decisions on the airline.

The author is a former civil aviation minister and a pilot
(As told to Kushan Mitra)

Published on: May 12, 2011, 12:00 AM IST
Posted by: Navneeta N, May 12, 2011, 12:00 AM IST