Air India hires yet another consultant

Air India hires yet another consultant

Mumbai/Kolkata: Air India, seemingly ever willing to take advice where it can get it, has appointed yet another consultant. The move comes as the airline struggles to cope with losses and accumulated debt in the midst of a government bailout.

Besides this, some recent senior appointments have come under a cloud and the shifting of domestic services to Delhi’s new Terminal 3 in November was marked by chaos.

The latest adviser to have been hired is Deloitte Consulting India Pvt. Ltd, which beat five other contenders—KPMG, McKinsey and Co., Booz and Co. Inc., Bain and Co. and the Boston Consulting Group. It will advise the airline on macro issues and review the turnaround programme.

Under the contract, Deloitte will present a report within two months, suggesting ways of reviving Air India.

Since the government merged Air India and Indian Airlines in 2006, the merged entity has engaged a clutch of consultants.

While Accenture Plc continues to oversee the integration process, the carrier has either engaged or been in talks with consultants such as McKinsey, NM Rothschild and Sons Ltd and Booz.

For operational restructuring, Air India hired three other foreign firms—US-based aviation consultant Simat Helliesen and Eichner Inc., Flugwerkzeuge Aviation Software GmbH of Austria and Texas-based technology company Sabre Holding Corp.—to help redraw its flight network and save on fuel costs.

For financial restructuring, Air India appointed SBI Capital Markets Ltd (SBICaps), an arm of State Bank of India.

Air India is keeping the hiring of Deloitte under wraps, said an aviation analyst who declined to be named, because it’s taken on so many of them in the past two years and rejected most of their plans.

Roopen Roy, Deloitte’s managing director in India, declined comment.

A senior Air India executive, requesting anonymity, said Deloitte will be conducting a “high-level review" of the current turnaround process.

“The consultant will not get into minute, operational details, but it will dwell on the macro issues...whether Air India is in sync with market realities while attempting to turn around," he said.

Experts and former top employees says hiring more consultants won’t help Air India.

“Bringing another consultant is going to be another futile exercise," said M.S. Balakrishnan, former director of finance at the erstwhile Indian Airlines, the former national domestic carrier. “Instead of bringing external consultants, Air India should take stock and carry out changes within."

There needs to be more questioning of what the consultants have achieved, said a former Air India staffer, who didn’t want to be identified.

“Is an airline run by employees or consultants? If consultants could have done a smart job, why did Accenture fail in the integration process? It is ridiculous to have several consultants while nobody is asking what were they doing," he said.

The consultants have not been able to help Air India, said an aviation consultant who didn’t want to be identified.

“Accenture could not identify the potential issue of taxation while the airline was supposed to spin off the ground-handling and engineering divisions. And it continued to make losses despite several consultants," he said.

An email sent to Accenture did not elicit any response.

On 18 November, Air India said it posted a net loss of Rs5,551 crore in the year ended March against the previous year’s net loss of Rs7,189 crore.

On behalf of Air India, SBICaps has sought approval from the Reserve Bank of India (RBI) to convert a major portion of its Rs18,000 crore of working capital loans into term loans, with a moratorium of two-three years on principal repayments as part of a financial restructuring plan.

A Kingfisher Airlines Ltd debt recast plan was approved on 23 November under this programme.

Air India has a total debt of Rs40,000 crore, including Rs18,000 crore of working capital loans.

If RBI agrees to the Air India debt recast, the carrier will be able to reduce the interest rate on its working capital loans to 6-6.5% from 12%, reducing its debt servicing burden.

“The airline did not do any thing in last 18 months except bringing highly paid executives in key positions," Balakrishnan said.

Air India’s board recently decided to sack Pawan Arora, the newly appointed chief operating officer of Air India Express following the controversies on his appointment.

The airline, however, said on Tuesday that Arora is still with Air India Express contradicting aviation minister Praful Patel who told Parliament on 23 November that Arora’s appointment had been cancelled.

In a related development, a two-member committee of government officials will review the appointment of Stefan Sukumar as chief of training, a position that hadn’t been advertised by the firm. Air India made three key appointments on 28 September, including those of Arora and Sukumar, despite objections raised at the time by some members of the board.