What sent Air India crashing?

For the national carrier, the spiral dive began in 2006-07. Air India made a loss of Rs 541 crore and Indian Airline's loss was Rs 230 crore. In about 700 days, from March 31, 2007 to March 31, 2009 — during which the airlines merged — the losses rocketed to a mind-boggling Rs 7,200 crore.
Aviation is a risky business, and carriers around the world have lost big money for a variety of reasons — from rising oil prices to a slowing world economy. What separates Air India from other carriers, both private and state-owned, are the reasons that led to the losses. Yes, it's been hit by ballooning fuel bills and falling demand. But the crisis at Air India is man-made to a large extent. The 800% increase in its losses in two years has much to do with the manner in which:
Air India and Indian (formerly Indian Airlines) were merged; aircraft were leased or purchased;
capacity was gifted away to foreign airlines under bilateral agreements; ground-handling in Bangalore and Hyderabad was relinquished to a proposed joint venture (and attempts are on to do the same elsewhere); flights were withdrawn from profitable routes; pilots weren’t sent for proper training.
Route to bigger losses: “The losses really began from 2006 onwards when a decision to aggressively dry and wet lease aircraft was taken to increase market share. There was no proper route study, marketing or pricing strategy. The airline took heavy losses till the market built up,” said an aviation analyst.
In 2006, Air India dry-leased four Boeing 777s for a period of five years, only to get delivery of its own aircraft from July 2007 onwards. The result: In the last two years it kept five Boeing 777s and five Boeing 737s on ground at a loss of Rs 840 crore from 2007 to 2009. Luckily for Air India, Boeing could not meet the delivery schedules for its new B 787 Dreamliners. If these aircraft had arrived on time, all of them would have been on the ground.
Three dry-leased B-747s on the Los Angeles route and one B-767 on the Bangkok and Kuala Lumpur route, flew from 2006 till 2008 with less than 40% load, leading to a combined loss of about Rs 200 crore in 2006-07 and again in 2007-08. “It takes time to develop a route. Just when the LA route had developed and had started getting full loads, it was shut down (in 2008) because the lease for the B-747s expired. Would any airline in the world do that? Stop flying to a route after developing it?” an aviation analyst asked.
16/07/09 Manju V/Times of India

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Categories: NACIL Jul 2009