THE flash strike by pilots of Air India has brought the airline back into national focus and once again for all the wrong reasons.
The tendency of Air India pilots to go on flash strike is an old one which has been allowed to become a habit as no strict action has ever been taken against them. This time the pilots of erstwhile Air India have gone on strike over training for the 29 new Dreamliner Boeing aircraft awaiting delivery as they do not want erstwhile Indian Airlines pilots to go through the same. While pilots the world over are a highly paid but unionised group prone to striking, Air India pilots take the cake as they have been declared ‘ workmen’ under the Workmen’s Compensation Act by court order.
Therefore, despite working on one of the highest paid jobs they enjoy the advantages of being workmen. Story The strike has been declared illegal and 26 pilots have been dismissed for the first time. How long this show of bravado from the government will last is anybody’s guess. Grapewine says the last time they went on a similar strike the Ministry of Civil Aviation proposed strong action, seeking to close down the airline temporarily but was not permitted by the PMO. Does this not sound logical in view of the fact that the Prime Minister, in an address to the nation from the ramparts of the Red Fort, has given an assurance that Air India would not be allowed to sink or close down? The result is there for everyone to see. Government coffers have been opened up for the airline, with a bailout package of Rs 30,000 crore over 9 years, Rs 4,700 crore of non- convertible debentures which are likely to be subscribed by government owned financial institutions and permission to go in for low cost external borrowings to the tune of $ 300 million ( over Rs 1500 crore). Already, Rs 3,200 crore of equity infusion has been done along with Rs 6,750 crore of working capital loan.
Will all this bring Air India back into the pink? Why did the merger of the two airlines done over four years back fail? These questions need to be examined to determine whether the existing government machinery has the will and capacity to turn around the ailing airline which was once a proud mascot of India.
To answer these questions we need to examine a bit of the past. A proposal to divest Air India was mooted in 2000 and by September 2001 it was a done deal in favour of a joint venture between the Tatas and Singapore Airlines with full support of all the Air India unions. However, two weeks before 9/ 11 took place in 2001, Singapore Airlines withdrew from the joint venture for reasons not disclosed though it is likely that they could not stomach Indian politics. Even as the Tatas were asked to look for another partner, 9/ 11 happened and no airline came forward to join the joint venture.
However, the point to note is that at that time the seven odd unions had joined hands to welcome privatisation — an unusual stand for unions to take— as they felt that their future was better off with the airline in private hands, notwithstanding the advantages of a secure government job. Therefore, they took a progressive stand. However, the decision to not privatise Air India and the subsequent one to merge it with Indian Airlines was not taken with their approval and shook the optimism of the unions which relapsed into their former trade union mindset.
The fact that an inspired merger from the top turned out to be a disaster is well documented. Not taking the pains to see through the merger, which requires a lot of delicate work, especially where many unions are involved, appears to be the main reason for the failure of the exercise.
Frequent changes in the top management was a signal that all was not well. Mismanagement and backseat driving without taking responsibility for decisions gone wrong at the top level have led to this disaster.
Parallels:
The turnaround of a sick company by highly recognised professionals has already occurred recently in India in the case of Satyam. Similarly, Japan Airlines was in deeper trouble than Air India but was turned around in a few years with a bailout package and is already making profit. In the US, financial failure gets resolved much quicker than elsewhere. The example of General Motors and Chrysler Motors which were turned around in about 40 days after filing for bankruptcy in 2009 highlights what quick decision making and close monitoring can do. Ford Motors refused a bailout and worked aggressively in foreign markets, emerging triumphant and regaining their investment grade rating. Air India, on the other hand, resisted an offer of help from the Board for Reconstruction of Public Enterprises on the ground that the company was less than three years old ( as a merged entity) and therefore beyond the scope of the Board’s assistance.
Solution
It, therefore, does appear that the government is lacking in commitment to change Air India’s fortunes. It is significant that notwithstanding the government largess, no major step has been taken to form a team, like was done in the case of Satyam, to turn the airline around. Under these circumstances where the government has not done anything significant other than pumping in taxpayers’ money into the airline, the only answer would be to hand it over to a private management as was done by Sri Lankan Airlines. They handed over the management of the government owned airline to Emirates Airline for a few years. The latter turned it around and have since handed back the management to the government of Sri Lanka.
The writer is Chairman of International Foundation of Aviation, Aerospace and Development ( India Chapter)
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