Rohit Nandan's Inheritance of Loss: To head debt-burdened Air India

Rohit Nandan's Inheritance of Loss: To head debt-burdened Air India

Air India has a new man in command. But with the flag-carrier's nearly six different companies, about Rs 44,000 crore in debt, growing discontent, political meddling, and a whole load of 'wrong' decisions, Nandan has one tough job before him.

New Air India chief Rohit Nandan New Air India chief Rohit Nandan
Air India has a new man in command.

Rohit Nandan, a joint secretary in the Ministry of Civil Aviation, has been named the airline's new Chairman and Managing Director. He has replaced Arvind Jadhav, whose term was slated to end in May 2012. Nandan is Air India's third chief in as many years.

Geetanjali Shukla
Interestingly, the announcement of Rohit Nandan's appointment came on a day when questions were raised in Parliament about Arvind Jadhav's appointment in 2009.

PM promises salaries for Air India staff

Gurudas Dasgupta of the Communist Party of India (CPI) shared a note, dated March 2008, in Parliament on Friday. According to him, the same committee that named Raghu Menon (who was then the Special Secretary and Financial Advisor to the Ministry of Civil Aviation) the chief in 2008, changed its stance within a year and named Jadhav as the airline's head. Dasgupta said: "The appointment is dubious; the performance is dubious; the result is dubious; and dubious is the attitude of the Government."

Senior BJP leader Murli Manohar Joshi further asked: "What was the need to terminate Raghu Menon's term within a year and revive the selection committee?"

PERSPECTIVE: Why govt's Rs 1,200 cr is only partial breather for AI

So not only has Jadhav's two-year term been tumultuous, his appointment too has taken a hit. In the course of his stint as Air India's CMD, Jadhav has faced employee ire - best case in point is the pilot strike that cost the airline about Rs 200 crore - and seen the airline bleed further.

According to what Minister of State for Personnel, Public Grievances and Pensions V Narayanaswamy told Parliament on Friday, Air India's working capital borrowings stand at Rs 22,165 crore, and it has availed of long-term loans of Rs 22,000 crore to finance its aircraft acquisition programme.

The airline's total outstanding payments stand at approximately Rs 5,000 crore.

Air India cargo business nosedives

Narayanaswamy added that the airline's daily revenue is Rs 22 crore, of which Rs 16.7 crore are paid daily to oil companies who have put the airline on a cash-and-carry basis since 2010.

Highlighting the tightrope walk that the state-owned carrier is forced to conduct, he said: "Only Rs 5.3 crore is left with the airline to meet the repayment of aircraft loans and part of interest payment on working capital. This has resulted in non-payment of wages/salaries partly from April 2011 onwards, non-payment to airport operators, vendors and other regular payments."

To the flag-carrier's credit, it has prepared a Turnaround Plan and a Financial Restructuring Plan in consultation with SBI Caps. While the turnaround plan will look into improving the airline's market and operational position, the financial plan will look into realignment of debt and infusion of equity.

BLOG: The Maharaja's Advocate

Narayanaswamy told Parliament on Friday: "The entire exercise of finalising the Financial Restructuring Plan and restructuring of loans would take about 3 months."

As part of the turnaround plan, Air India will look into rationalisation of routes, re-scheduling of aircraft, rationalisation of manpower, reduction in contractual employment, and review of all agreements on all technical/operational matters.

Will these measures and a change of guard at the top help the ailing Indian carrier? Well, if one were to go by what the Opposition thinks, the answer is NO.

Raising doubts on Air India's aircraft acquisition plan, Dasgupta said: "When V Thulasidas was the chairman (appointed in 2003), only 28 aircraft were sought to be purchased. But, post the change in chairman and change in guard, 40 new aircraft were added to the list of purchase."

This, when Air India's aircraft fly for an average of eight hours per day, compared to 12 hours of low-cost carrier SpiceJet.

MUST READ: Why Boeing Dreamliner could change things for Air India

The often-raised issue of foreign airlines being liberally granted rights into India was also brought up.

Dasgupta said: "You have surrendered the bilaterals. Air India has surrendered the reciprocal facility. Why have they allowed Emirates to fly more flights than Air India?"

Emirates operates 185 weekly flights from 10 Indian cities, much more than what any local Indian carrier does.

High taxes, lack of adequate infrastructure, price sensitivity of the average Indian flyer, among other things, make the current environment a tough one for airlines to operate in.

But for the flag-carrier the battle is harder - nearly six different companies (Alliance Air, Air India Express, Hotel Corporation of India etc), about Rs 44,000 crore in debt, growing discontent, political meddling, and a whole load of 'wrong' decisions.

Rohit Nandan indeed has one tough job before him.