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Jitender Bhargava

ir India, an institutionwhich once evoked enor-mous pride in Indians be-cause of its superlativeperformance globally, has indubita-bly fallen on bad days. Its ability tosurvive has become a subject matterof animated discussions which in a

way also reects the signicance of

this corporate entity. Companies canexist; companies can perish. WithAir India, however, people in thecountry have had an emotional bondand therefore few would like to see itgo into oblivion.What has led Air India to its cur-rent state? An apparent answer:failure of Air India to transform it-self to face competition arising outof the opening of Indian skies inthe nineties. The argument, thoughright to an extent, does not, howev-er, fully justify the factual position.A dispassionate study of companiesworldwide, across all industrial sec-tors, which commenced operations

in the rst half of the last century,

would reveal that not many have

ourished in the intensely competi

-tive environment. The current stateof Air India is therefore certainly notan isolated case. Numerous compa-nies of Air India’s vintage have ei-ther perished or are struggling tosurvive—a far cry from the dayswhen these companies commandedleadership in their respective indus-trial sectors. This declining trend intheir fortunes can best be attributedto what I would like to call an ‘ear-ly-mover disadvantage’. Companiesthat have emerged in the last twodecades have been found to be ad-vantageously placed with regard toproductive work practices, focus on

customer, sound nancial manage

-ment, aggressive marketing strate-gies, etc. vis-a-vis companies of theearlier era because they have had

their baptism by re in the market

place unlike the companies of yester-year, which were born in a monop-oly era, and therefore had policiesand practices to suit the environ-ment that then existed.

Early-mover disadvantage

The study will further show that inmost cases the later a company hasbeen established the better has beenits performance and ability to adaptto changing requirements of cus-tomers. This can be illustrated bytaking the example of the auto sec-tor. Hindustan Motors and PremierAutomobiles have been in the busi-ness of manufacturing cars since the

But to save it we need to be convinced the national carrier must survive, then we

must redene its role: do we want it to be a commercial airline or a social one?

All is not lost for Air India, not yet.

The frst-class cabin o Air India’sB777 (above) is among the best inthe industry, yet occupancy is poorbecause the government gives reeupgrades to even ex-ministers andormer secretaries or lie! Photocourtesy: Jitender Bhargava

GovernanceNow | May 1-15, 2010

people politicspolicy performance

PSU Misgovernance

fties and the sixties. How do these

companies rank today in the auto-mobile sector with respect to theirpeers? How good are their cars ascompared to those produced bycompanies that set up their assem-bly lines in the nineties and in thecurrent decade? The response isso obvious that it need not even bestated. The two companies referredto have been in the private sectorwhere organisations enjoy relatively

greater exibility to adapt to emerg

-ing changes than a government con-trolled organisation, like Air India.These two companies are inciden-tally not the only ones to have been

aicted by the ‘early-mover disad

-vantage’ syndrome. In fact, look upany sector and the companies thatemerged at the time of India’s inde-pendence or soon thereafter and youwill have several instances of com-panies meeting the fate akin to thatof Air India.I thought it prudent to give this il-lustrative example so as to demon-strate that there is nothing funda-mentally wrong with Air India todayexcept that it is paying the price of being a company cast in the mouldof yesteryear. Remember brandslike PANAM, TWA, Chrysler and Gen-eral Motors, which once generatedawe, but have either perished or areno longer regarded as leaders. This,however, is not to suggest that nocompany of yesteryear has survived

or can ourish. Mercedes is still a

much sought-after global brand.Closer home, Tata Steel continues tolead the steel sector in spite of be-ing over a century old. The credit forsuch institutions goes to the visiontheir respective managements havehad; the re-engineering of work pro-cesses on an ongoing basis that theyundertook, their keenness to alwaysstay ahead of the competition and,more importantly, ensuring a prod-uct that can be counted as amongstthe best at all times.Has Air India succeeded in re-engi-neering itself over the years for en-suring its survival in a competitivemarket? ‘No’ would be the obviousand emphatic answer. Besides be-ing a victim of the ‘early-mover dis-advantage’ phenomenon it also hasall the drawbacks of being a gov-ernment owned company. As a pub-lic sector undertaking, Air Indiahas to work within the frameworkprescribed by the owners that is

simply not conducive for ecient

functioning.For better understanding and animpartial conclusion on Air India,one can look at any other sector,where both government-owned andprivate companies are operating:

Reliance and ONGC in the eld of oil

exploration, Airtel and BSNL in thetelecom sector, Airports Authority of India and GMR/GVK for running air-ports. Few, if any at all, governmentsector companies can claim to beperforming better than their privatesector counterparts on any of the keyperformance parameters.

Government ownership a drag

If viewed in the context of the above,it will be grossly unfair to expect AirIndia to emerge as a market leaderby having a product that can matchthat of competing airlines. When adiscerning customer looks for valuefor money while buying a ticket, Air

India can naturally not be his rst

or second choice. And if a companycannot feature as a top of the mindproduct it will undoubtedly lose outon premium passengers and reve-nue. In this reality, which should beobvious to most, lies the cause of AirIndia’s decline in recent years.If the obvious causes of decline areoverlooked for equally obvious rea-sons by those at the helm at the Ra- jiv Gandhi Bhawan, Air India wouldcontinue to bleed and be seen gasp-ing for breath. Nomination of corpo-rate bigwigs from the private sectorand appointment of an expat chief

operating ocer can best be de

-scribed as cosmetic actions with no

signicant results likely to emerge

from them. If the government, in itscapacity as the owner, is serious inits desire to see Air India prosper, itwill have to free the airline from its

shackles as a rst step. Don’t get me

wrong, we are not talking privatisa-tion here, but operational freedom.

Litmus test

What are the factors that distinguishsuccessful companies from others?Successful companies are profes-sionally run; they have a well-delib-erated business plan, etc. In otherwords, they:

Operate as a commercial entity.

Have work practices that are pro-

ductive, ecient and customer

AI-IA merger decision was “whimsical”

March 13: The Committee on Public Undertakings(COPU) lambasted the decision to merge AI and Indian Airlines and asked the government to have separatedomestic and international airlines under a singleholding company. It also recommended xing o re-sponsibility on “agencies and individuals” who took such a “whimsical” decision and sought “suitableaction” to prevent “intangible loss”. These remarkscame ater Air India recorded a loss o Rs 5,400 crorein 2009-10. The current scal estimates are upwardso Rs 7,000 crore.

“Give more autonomy to AI” April 22: The Standing Committee on Transport, Tour-ism and Culture asked the government to grant moreautonomy to the national carrier and “not impose itsdecisions” on the ailing airline. It also asked AI to“put its act together as early as possible or reclaim-ing its ‘Maharaja’ status”.

IPL Carrier Service April: A Delhi-Coimbatore AI fight scheduled to leaveon the April 20 morning was aborted less than 12hours beore its departure and the aircrat was de-ployed as a chartered fight rom Chandigarh to Chen-nai. Who were these special customers? Civil aviationminister Praul Patel’s daughter Poorna, who is ‘hos-pitality manager’ or Indian Premier League and somecricketers. That was just one more episode rom theIPL controversy. AI bosses maintained that diverting the aircrat was a commercial decision. It’s possiblythanks to such “commercial decisions” that the airlineis where it is today.

Minister’s other daughter Poorna’s sister too is not to be let behind. When Avni,her husband Prashant and in-laws were going to theMaldives, AI deployed a larger than scheduled aircratto ensure business-class seats or them, according toa report.

Worst is over: Patel April 13: AI is charting the recovery path, says civilaviation minister Praul Patel. “Earlier the losses werein the average o Rs 400 crore per month. Now thesehave started coming down by at least Rs 100 crore per month,” Patel said. “The worst is over and Air India iscontinuing on a path o recovery.” Let’s hope so. Moresound bytes rom the minister: “Certainly things arelooking much more controlled than two months ago.

Freebies or ex-ministers April 29: Nothwithstanding nances, the governmenthas decided to give ormer ministers, secretaries aswell as their amily members lie-long upgrades torst class tickets on AI. Patel told the Lok Sabha thatsuch acilities will not add any burden on AI or other agencies and “will be extended only i vacant seatsare available”. That o course, is clever ocialese.Ministers and babus are never known to have beendenied. Reer to “minister’s daughter item” above.

Mahaaa’ avail