Saving Air India…by Pritish Nandy

Finally Air India has woken up from its coma. It has slashed its ticket rates 15% below that quoted by low cost carriers, starting off what you could call a price war in the domestic skies. Hopefully, this will be the beginning of a series of aggressive marketing measures. Or else, it will almost certainly fly into bankruptcy.

The national carrier has already tumbled from its No 1 position. It’s currently No 4 with 15% market share and struggling to stay there. Most analysts believe that SpiceJet, which is No 5 with 14% share, will soon overtake it. The passenger load is under 60%, lowest in the industry. Others average 75 to 80%. But then Air India has the largest fleet size because, even as it was sinking into insolvency under the dead weight of its accumulated losses of Rs 15,000 crore and huge annual losses that kept increasing, the ministry kept arm twisting it to buy more and more planes. Finally it reached a stage where interest payment on loans became nearly equal to the revenue of the airlines. And why were so many planes bought? No one has an answer.

But this column is not about Air India’s problems. It’s about solutions. The national carrier has lived with misfortune for decades. Manipulative ministers, effete bureaucrats posturing as professional managers, and a third rate management at the top, that crawled when asked to bend have been its persistent tragedy. Everyone treated it as a fiefdom to loot. Nobody wanted it to become one of the world’s finest airlines which it could have easily been. Its much abused unions, overweight hostesses, middle aged pursers, overpaid pilots and pampered staff have been the targets of every critical assessment. But the fact is, despite all this, Air India could have stayed No 1 in the Indian skies if it had honest, capable, committed leadership. That’s where the real deficit is.

The truth is: Everyone wants Air India to go belly up. The clear intent is to discredit the national carrier and then sell it cheap. The short list of buyers is already there. Given the vast properties it owns, the land assets, the human and technical infrastructure at the ground level, it’s a great buy. All the new owner has to do is chuck out the top management and bring in his own team. And, if you ask me, that is exactly why Air India has been driven into such a tight corner– so that one of its rivals can sneakily acquire it. By proxy or through a complex maze of intermediates so that no one will ever find out who bought it. A few years down the line, when things quieten down, the two entities can be merged to become king of the Indian skies. Its true valuation will then emerge. There appears to be an entire bunch of people working to this devious game plan.

Even now, one quick shot of capital and long term debt, an overhaul of its top management, some accommodation by the employees, which will easily happen if someone persuades the unions instead of trying to bully them, and with support from the banks and oil companies (all of which is easily possible since Air India is still a State owned enterprise) the national carrier can be up and running within two years. What it needs is a clear mandate for change, reversal of some recent decisions regarding landing rights, a more aggressive marketing and pricing policy, and a free hand to go and slaughter the local rivals. In six months Air India can bring them to their knees, begging for mercy. Including those rivals plotting and planning its demise.

It’s entirely a game of logistics management, aggressive pricing and effective aircraft utilisation, on all three of which Air India has been fighting its rivals with its hands tied behind its back. The problem is that its rivals have the support of those who actually run Air India and take all the crucial decisions. So how can it compete? At below 60% passenger load, Air India can afford to take any pricing decision that’s required to run its rivals out of business. But will it be allowed to do so? Will it be allowed to restart its most profit making routes which were deliberately stopped and handed over to other airlines? Will it be allowed to fly wherever it finds profitable instead of where the Government wants it to fly? It needs nothing apart from one serious injection of funds and the freedom to take its own business decisions without interference