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it to be a commercial airline or a social one?
Jitender Bhargava ir India, an institution which once evoked enormous pride in Indians because of its superlative performance globally, has indubitably fallen on bad days. Its ability to survive has become a subject matter of animated discussions which in a way also reflects the significance of this corporate entity. Companies can exist; companies can perish. With Air India, however, people in the country have had an emotional bond and therefore few would like to see it go into oblivion. What has led Air India to its current state? An apparent answer: failure of Air India to transform itself to face competition arising out of the opening of Indian skies in the nineties. The argument, though right to an extent, does not, however, fully justify the factual position. A dispassionate study of companies worldwide, across all industrial sectors, which commenced operations in the first half of the last century, would reveal that not many have flourished in the intensely competitive environment. The current state of Air India is therefore certainly not an isolated case. Numerous companies of Air India’s vintage have either perished or are struggling to survive—a far cry from the days when these companies commanded leadership in their respective industrial sectors. This declining trend in their fortunes can best be attributed to what I would like to call an ‘early-mover disadvantage’. Companies that have emerged in the last two decades have been found to be advantageously placed with regard to productive work practices, focus on customer, sound financial management, aggressive marketing strategies, etc. vis-a-vis companies of the earlier era because they have had
All is not lost for Air India, not yet.
The first-class cabin of Air India’s B777 (above) is among the best in the industry, yet occupancy is poor because the government gives free upgrades to even ex-ministers and former secretaries for life! Photo courtesy: Jitender Bhargava
their baptism by fire in the market place unlike the companies of yesteryear, which were born in a monopoly era, and therefore had policies and practices to suit the environment that then existed.
The study will further show that in most cases the later a company has been established the better has been its performance and ability to adapt to changing requirements of customers. This can be illustrated by taking the example of the auto sector. Hindustan Motors and Premier Automobiles have been in the business of manufacturing cars since the
This. When a discerning customer looks for value for money while buying a ticket. In other words. Who were these special customers? Civil aviation minister Praful Patel’s daughter Poorna. “Earlier the losses were in the average of Rs 400 crore per month.000 crore. is not to suggest that no company of yesteryear has survived or can flourish. AI bosses maintained that diverting the aircraft was a commercial decision. look up any sector and the companies that emerged at the time of India’s independence or soon thereafter and you will have several instances of companies meeting the fate akin to that of Air India. Closer home. Tourism and Culture asked the government to grant more autonomy to the national carrier and “not impose its decisions” on the ailing airline. Chrysler and General Motors.people politics policy performance PSU Misgovernance Maharaja’s travails prescribed by the owners that is simply not conducive for efficient functioning. 4 IPL Carrier Service April: A Delhi-Coimbatore AI flight scheduled to leave on the April 20 morning was aborted less than 12 hours before its departure and the aircraft was deployed as a chartered flight from Chandigarh to Chennai. 4 Worst is over: Patel April 13: AI is charting the recovery path. Don’t get me wrong. government sector companies can claim to be performing better than their private sector counterparts on any of the key performance parameters. who is ‘hospitality manager’ for Indian Premier League and some cricketers. For better understanding and an impartial conclusion on Air India. in its capacity as the owner. lies the cause of Air India’s decline in recent years.” Patel said. If the government. That of course. It’s possibly thanks to such “commercial decisions” that the airline is where it is today. Air India can naturally not be his first or second choice. Ministers and babus are never known to have been denied. And if a company cannot feature as a top of the mind product it will undoubtedly lose out on premium passengers and revenue. the government has decided to give former ministers. Few. it will have to free the airline from its shackles as a first step. Mercedes is still a much sought-after global brand. they have a well-deliberated business plan. one can look at any other sector. Remember brands like PANAM. says civil aviation minister Praful Patel. where both government-owned and private companies are operating: Reliance and ONGC in the field of oil exploration.400 crore in 2009-10. Airtel and BSNL in the telecom sector. Government ownership a drag If viewed in the context of the above. That was just one more episode from the IPL controversy. like Air India. Patel told the Lok Sabha that such facilities will not add any burden on AI or other agencies and “will be extended only if vacant seats are available”. It also asked AI to “put its act together as early as possible for reclaiming its ‘Maharaja’ status”. the re-engineering of work processes on an ongoing basis that they undertook. In this reality. n Have work practices that are productive. Nomination of corporate bigwigs from the private sector and appointment of an expat chief operating officer can best be described as cosmetic actions with no significant results likely to emerge from them. More sound bytes from the minister: “Certainly things are looking much more controlled than two months ago. 4 Freebies for ex-ministers April 29: Nothwithstanding finances. more importantly. fifties and the sixties. 2010 . if any at all. These two companies are incidentally not the only ones to have been afflicted by the ‘early-mover disadvantage’ syndrome. Tata Steel continues to lead the steel sector in spite of being over a century old. is clever officialese. which should be obvious to most. The current fiscal estimates are upwards of Rs 7. Besides being a victim of the ‘early-mover disadvantage’ phenomenon it also has all the drawbacks of being a government owned company. If the obvious causes of decline are overlooked for equally obvious reasons by those at the helm at the Rajiv Gandhi Bhawan. I thought it prudent to give this illustrative example so as to demonstrate that there is nothing fundamentally wrong with Air India today except that it is paying the price of being a company cast in the mould of yesteryear. TWA. efficient and customer 32 GovernanceNow | May 1-15. we are not talking privatisation here. Airports Authority of India and GMR/GVK for running airports. etc. Refer to “minister’s daughter item” above. which once generated awe. is serious in its desire to see Air India prosper. however.” Let’s hope so. When Avni. The credit for such institutions goes to the vision their respective managements have had. 4 Minister’s other daughter Poorna’s sister too is not to be left behind. These remarks came after Air India recorded a loss of Rs 5. In fact. ensuring a product that can be counted as amongst the best at all times. “The worst is over and Air India is continuing on a path of recovery. Air India would continue to bleed and be seen gasping for breath. but have either perished or are no longer regarded as leaders. It also recommended fixing of responsibility on “agencies and individuals” who took such a “whimsical” decision and sought “suitable action” to prevent “intangible loss”. How do these companies rank today in the automobile sector with respect to their peers? How good are their cars as compared to those produced by companies that set up their assembly lines in the nineties and in the current decade? The response is so obvious that it need not even be stated. their keenness to always stay ahead of the competition and. AI deployed a larger than scheduled aircraft to ensure business-class seats for them. but operational freedom. 4 “Give more autonomy to AI” April 22: The Standing Committee on Transport. they: n Operate as a commercial entity. according to a report. As a public sector undertaking. Now these have started coming down by at least Rs 100 crore per month. her husband Prashant and in-laws were going to the Maldives. it will be grossly unfair to expect Air India to emerge as a market leader by having a product that can match that of competing airlines. Has Air India succeeded in re-engineering itself over the years for ensuring its survival in a competitive market? ‘No’ would be the obvious and emphatic answer. The two companies referred to have been in the private sector where organisations enjoy relatively greater flexibility to adapt to emerging changes than a government controlled organisation. Litmus test What are the factors that distinguish successful companies from others? Successful companies are professionally run. secretaries as well as their family members life-long upgrades to first class tickets on AI. Air India has to work within the framework 4 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 separate domestic and international airlines under a single holding company.
howsoever good. is allowed to operate as a Board-driven company with no external interference. it is Air India which serves the nation on the social platform. Mumbai. n Have a management team at the top that can be described as the best. is therefore to redefine Air India’s role after being convinced that it wants the national carrier to survive. Should Air India function as a commercial airline like other private carriers or differently (carry the burden of social objectives)? If Air India is not to be allowed to operate on commercial lines. adherence to government policies and procedures. When Air India places an order for aircraft on Boeing or Airbus it extracts an offset business running into millions of dollars for Managing it professionally One of the biggest myths perpetuated over the years is that our PSUs. Civil Aviation Minister Praful Patel has in recent times been guilty of creating confusion on the role of Air India by stating ad nauseam that all airlines need to be treated equally and that Air India need not enjoy a special place. for most. for how long? There is still hope provided that Air India is freed from the shackles of the government. Air India.friendly. currently takes decisions on all major issues without a shred of accountability. If Capt Gopinath can set up Cargo 360 and make it a success what prevents Air India from doing the same? Likewise. when Jet Airways and Kingfisher place orders no such benefit comes to India.GovernanceNow. There are numerous government policies that render Air India at a disadvantage in comparison to private airlines. overhaul) besides of course the main business of running airlines. n Have a renowned and experienced set of individuals on the board to guide the destiny of the company with a missionary zeal. repair. operating out of Air India building at Nariman Point. All three fields have enormous scope for generating additional revenues. in its capacity as the owner. More importantly. cargo. headed by Sitaram Yechury. Instead of being the natural leader in aviation business in India and the adjoining countries. If Air India’s survival has to be ensured it should be the management of Air India. If anyone thinks otherwise. turn out a class product? This is the moot question that needs to be answered if Air India has to be salvaged. viz. exploits its core competencies in various fields and carry all its employees as a team without treating them as liabilities. Air India. as is the general speculation. However. Today the government has unfortunately created a scenario as if Air India’s Maharaja is standing outside the precincts of the finance ministry with a begging bowl for survival. in the fields of MROs and airport terminal services. Air India is being unfortunately projected as one which may not live to see another day. All key decisions—merger. faster the sounding of the death knell. Such unwarranted comparisons take a heavy toll of the company’s image and morale of employees. Numerous examples of this nature can be cited to demonstrate the latent gains that Air India brings to the country. While Patel can have his business interests in private airlines. Though separate Strategic Business units were created at the time of merger in 2007 no significant headway has been made in the past two years. in today’s context. Have the flexibility to change work practices with changing times. the two parliamentary committees—the Standing Committee on Transport. seems like they have not been asked a simple question: Baap ka airline samjha hai kya? Indian companies. and shall remain so. which Air India and erstwhile Indian Airlines have in the past six decades developed core competencies in all aviation related fields—airport terminal services. the government has to reaffirm in no uncertain terms that Air India is the country’s national carrier. enjoy full autonomy in their day to day functioning. There are many Air India loyalists who swear by it. n Have a team of motivated. taking decisions and not Rajiv Gandhi Bhawan in Delhi. For all the new flights that Air India operates at the government’s behest because it helps serve bigger national interests. n Bhargava is a just-retired executive director of Air India.com 33 . etc—responsible for Air India’s current travails were taken at Rajiv Gandhi Bhawan. will possibly falter on all counts. headed by V Kishore Chandra Deo—have lambasted the civil aviation ministry on aircraft acquisition and merger. So. being accountable to over a dozen parliamentary committees—on which several hundred hours of top management time are spent annually. if operated as independent business units. MROs (maintenance. he is only deceiving himself. In fact. But. comparison with private airlines on various performance parameters must stop. disciplined and committed work force. etc. later it is done. it must financially compensate Air India for it. including Air India. www. can he. greater the hope. Sooner it is done. n All decisions taken by the board and senior management are governed solely by what is good and in the interest of the company. isn’t a lost cause as yet. n It just Occurred tO us The way Praful Patel’s daughters are ordering Air India bosses around. describing them as the two main issues responsible for Air India’s huge financial losses.. if the ingredients for a dish given to the master chef are not of good quality. frequent change of CEO. The foremost action that needs to be taken by the government. which besides being time consuming also come in the way of selecting the best. Moving forward Salvaging Air India As if these drawbacks were not sufficient to ground Air India. and the Committee on Public Undertakings. aircraft acquisition.
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