Fasten the seatbelts

Air India is making news these days for all the wrong reasons. Articles speak of burgeoning losses and directions being issued for cost-cutting, employees being asked to ‘shape up or ship out’, and being permitted to seek alternative employment while remaining on the rolls of Air India.
In the mid-90s, Indian Airlines and Air India went through similar crises. Though the members of the boards were common, the managements of the two airlines adopted very different strategies. Air India reduced staff and stations on its network and closed down offices; Indian Airlines (IA) retained its work force, increased emoluments, commenced new routes and moved into profits in a few years.
In 1994, IA faced rampant and endemic industrial unrest. Strikes took place every year, leading to the exit of chief executives — 1990 to 1994 seeing three Chairman and Managing Directors (CMDs) being forced to resign. Equally endemic were the losses, which commenced with the continued grounding of the entire spanking new fleet of 31 Airbus 320 aircrafts for over nine months, leading to a loss of Rs 127 crore.
Vayudoot, the feeder airline, collapsed and was merged with IA, carrying with it losses of over Rs 250 crore. The playing field for IA was not level, since while the national carrier had to air-link many stations that the private operators were unwilling to, private airlines could concentrate their entire fleets on profitable trunk routes. IA was, therefore, faced with an annual recurring loss of over Rs 250 crore a year. Recovery seemed impossible, since there was an exodus of pilots and engineers: 166 pilots including 17 commanders left IA for the private sector, which were offering emoluments twice that of public sector airlines.
By 1998, however, the situation changed dramatically. To begin with, there was total industrial peace. Unions did not even resort to ‘go slows’. From chronic annual losses, the airline achieved a modest profit of Rs 45 crore. (Incidentally, increase of fares did not contribute towards this, since increases were only resorted to match increases in costs of Aviation Turbine Fuel.)
15/07/09 Hindustan Times

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Categories: NACIL Jul 2009