Turning around Air India

Turning around Air India
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First Published: Sun, Aug 09 2009. 10 39 PM IST

Illustration: Jayachandran / Mint
Illustration: Jayachandran / Mint
Updated: Sun, Aug 09 2009. 10 39 PM IST
The plan to steer Air India back to profitability is a credible first step because it accepts that the national carrier is in a mess and that it needs to alter its business strategy. This plan was made public by Arvind Jadhav, a career bureaucrat who in May took charge of National Aviation Co. of India Ltd, the government company that owns Air India.
The national carrier has lost market share, even as it has piled up accumulated losses of Rs7,000 crore and debt exceeding Rs15,000 crore. Add to that an ambitious plan to buy new planes and mounting employee costs, and you have a severe cash crunch. The government airline company has had to delay staff salaries.
Illustration: Jayachandran / Mint
Jadhav has done well since he took charge to make it clear to employees that business as usual is not an option. Sending out a clear message was a smart idea: The unions should know how deep the problem is. Many decisions announced on Friday—such as eventually making Air India a primarily low-cost airline, breaking up the monolith and creating new subsidiaries to manage ground handling, aircraft maintenance and cargo, focusing on operating efficiency—are also good ideas.
It seems that Jadhav has steered clear of some of the more drastic steps that other ailing airlines took during their own life and death moments, which Mint had reported in a 21 July special report based on conversations with global management consultants and airline experts on what Air India could do to evade a crash landing.
Thus the Friday plan does not consider tough options, including selling off prime property such as the airline’s towering headquarters at Nariman Point in Mumbai, one of the most expensive patches of land in the world. Nor is there even a mention of job cuts, though there are welcome efforts to cut down on the lavish incentives to employees.
A lot now depends on what happens from now on. It is clear from both global airline experiences as well as what happened to Satyam Computer Services Ltd that an empowered management team, a tough CEO and a truly independent board are imperatives. In other words, the government should stop meddling in Air India. There is no guarantee that the national carrier will eventually survive this crisis, but Jadhav needs to be given a fair chance.
He has undoubtedly started on the right note, by openly accepting self-inflicted damage and also promising to alter the business strategy—in sharp contrast to the recent whining of the loss-making private airlines.
What should Air India’s chairman do to turn a profit? Tell us at views@livemint.com
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First Published: Sun, Aug 09 2009. 10 39 PM IST
More Topics: Ourviews | Air India | Arvind Jadhav | Nacil | Views |