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 Jitender Bhargava

Air India, an institutionwhich once evoked enor-mous pride in Indians be-cause of its superlative

performance globally, has indubita-bly fallen on bad days. Its ability tosurvive has become a subject matterof animated discussions which in away also reects the signicance of this corporate entity. Companies canexist; companies can perish. With

Air India, however, people in thecountry have had an emotional bondand therefore few would like to see itgo into oblivion.

What has led Air India to its cur-rent state? An apparent answer:failure of Air India to transform it-self to face competition arising outof the opening of Indian skies inthe nineties. The argument, thoughright to an extent, does not, howev-er, fully justify the factual position.

A dispassionate study of companiesworldwide, across all industrial sec-tors, which commenced operationsin the rst half of the last century,would reveal that not many haveourished in the intensely competi-tive environment. The current stateof Air India is therefore certainly notan isolated case. Numerous compa-nies of Air India’s vintage have ei-ther perished or are struggling tosurvive—a far cry from the dayswhen these companies commandedleadership in their respective indus-

trial sectors. This declining trend intheir fortunes can best be attributedto what I would like to call an ‘ear-ly-mover disadvantage’. Companiesthat have emerged in the last twodecades have been found to be ad-vantageously placed with regard toproductive work practices, focus oncustomer, sound nancial manage-ment, aggressive marketing strate-gies, etc. vis-a-vis companies of theearlier era because they have had

their baptism by re in the marketplace unlike the companies of yesteryear, which were born in a monop-oly era, and therefore had policiesand practices to suit the environ-ment that then existed.

Early-mover disadvantageThe study will further show that inmost cases the later a company hasbeen established the better has beenits performance and ability to adaptto changing requirements of customers. This can be illustrated bytaking the example of the auto sec-tor. Hindustan Motors and PremierAutomobiles have been in the busi-ness of manufacturing cars since the

But to save it we need to be convinced the national carrier must survive, then wemust redene its role: do we want it to be a commercial airline or a social one?

 All is not lost for  Air India, not yet.

The frst-class cabin o Air India’sB777 (above) is among the best inthe industry, yet occupancy is poorbecause the government gives reeupgrades to even ex-ministers andormer secretaries or lie! Photocourtesy: Jitender Bhargava

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people  politics policy  performance

 PSU Misgovernance

fties and the sixties. How do thesecompanies rank today in the auto-mobile sector with respect to theirpeers? How good are their cars ascompared to those produced by

companies that set up their assem-bly lines in the nineties and in thecurrent decade? The response isso obvious that it need not even bestated. The two companies referredto have been in the private sectorwhere organisations enjoy relativelygreater exibility to adapt to emerg-ing changes than a government con-trolled organisation, like Air India.These two companies are inciden-tally not the only ones to have beenaicted by the ‘early-mover disad-vantage’ syndrome. In fact, look upany sector and the companies that

emerged at the time of India’s inde-pendence or soon thereafter and youwill have several instances of com-panies meeting the fate akin to thatof Air India.

I thought it prudent to give this il-lustrative example so as to demon-strate that there is nothing funda-mentally wrong with Air India todayexcept that it is paying the price of being a company cast in the mouldof yesteryear. Remember brandslike PANAM, TWA, Chrysler and Gen-eral Motors, which once generatedawe, but have either perished or are

no longer regarded as leaders. This,however, is not to suggest that nocompany of yesteryear has survivedor can ourish. Mercedes is still amuch sought-after global brand.Closer home, Tata Steel continues tolead the steel sector in spite of be-ing over a century old. The credit forsuch institutions goes to the visiontheir respective managements havehad; the re-engineering of work pro-cesses on an ongoing basis that theyundertook, their keenness to alwaysstay ahead of the competition and,more importantly, ensuring a prod-uct that can be counted as amongst

the best at all times.Has Air India succeeded in re-engi-

neering itself over the years for en-suring its survival in a competitivemarket? ‘No’ would be the obviousand emphatic answer. Besides be-ing a victim of the ‘early-mover dis-advantage’ phenomenon it also hasall the drawbacks of being a gov-ernment owned company. As a pub-lic sector undertaking, Air Indiahas to work within the framework

prescribed by the owners that issimply not conducive for ecientfunctioning.

For better understanding and animpartial conclusion on Air India,

one can look at any other sector,where both government-owned andprivate companies are operating:Reliance and ONGC in the eld of oilexploration, Airtel and BSNL in thetelecom sector, Airports Authority of India and GMR/GVK for running air-ports. Few, if any at all, governmentsector companies can claim to beperforming better than their privatesector counterparts on any of the keyperformance parameters.

Government ownership a drag If viewed in the context of the above,

it will be grossly unfair to expect AirIndia to emerge as a market leaderby having a product that can matchthat of competing airlines. When adiscerning customer looks for valuefor money while buying a ticket, AirIndia can naturally not be his rstor second choice. And if a companycannot feature as a top of the mindproduct it will undoubtedly lose outon premium passengers and reve-nue. In this reality, which should beobvious to most, lies the cause of AirIndia’s decline in recent years.

If the obvious causes of decline are

overlooked for equally obvious rea-sons by those at the helm at the Ra- jiv Gandhi Bhawan, Air India wouldcontinue to bleed and be seen gasp-ing for breath. Nomination of corpo-rate bigwigs from the private sectorand appointment of an expat chief operating ocer can best be de-scribed as cosmetic actions with nosignicant results likely to emergefrom them. If the government, in itscapacity as the owner, is serious inits desire to see Air India prosper, itwill have to free the airline from itsshackles as a rst step. Don’t get mewrong, we are not talking privatisa-

tion here, but operational freedom.

Litmus testWhat are the factors that distinguishsuccessful companies from others?Successful companies are profes-sionally run; they have a well-delib-erated business plan, etc. In otherwords, they:n Operate as a commercial entity.n Have work practices that are pro-

ductive, ecient and customer

4  AI-IA merger decision was “whimsical”

March 13: The Committee on Public Undertakings(COPU) lambasted the decision to merge AI and Ind

 Airlines and asked the government to have separatdomestic and international airlines under a singleholding company. It also recommended xing o responsibility on “agencies and individuals” who toosuch a “whimsical” decision and sought “suitable

action” to prevent “intangible loss”. These remarkscame ater Air India recorded a loss o Rs 5,400 croin 2009-10. The current scal estimates are upwardo Rs 7,000 crore.

4 “Give more autonomy to AI” April 22: The Standing Committee on Transport, Touism and Culture asked the government to grant morautonomy to the national carrier and “not impose idecisions” on the ailing airline. It also asked AI to“put its act together as early as possible or reclaiming its ‘Maharaja’ status”.

4 IPL Carrier Service April: A Delhi-Coimbatore AI fight scheduled to leavon the April 20 morning was aborted less than 12hours beore its departure and the aircrat was de-ployed as a chartered fight rom Chandigarh to Chenai. Who were these special customers? Civil aviatiminister Praul Patel’s daughter Poorna, who is ‘hopitality manager’ or Indian Premier League and socricketers. That was just one more episode rom theIPL controversy. AI bosses maintained that divertinthe aircrat was a commercial decision. It’s possiblythanks to such “commercial decisions” that the airis where it is today.

4 Minister’s other daughter Poorna’s sister too is not to be let behind. When Avher husband Prashant and in-laws were going to thMaldives, AI deployed a larger than scheduled aircto ensure business-class seats or them, accordinga report.

4 Worst is over: Patel April 13: AI is charting the recovery path, says civilaviation minister Praul Patel. “Earlier the losses win the average o Rs 400 crore per month. Now theshave started coming down by at least Rs 100 crore month,” Patel said. “The worst is over and Air Indiacontinuing on a path o recovery.” Let’s hope so. M

sound bytes rom the minister: “Certainly things arlooking much more controlled than two months ago

4 Freebies or ex-ministers April 29: Nothwithstanding nances, the governmehas decided to give ormer ministers, secretaries awell as their amily members lie-long upgrades torst class tickets on AI. Patel told the Lok Sabha thasuch acilities will not add any burden on AI or otheagencies and “will be extended only i vacant seatsare available”. That o course, is clever ocialese.Ministers and babus are never known to have beendenied. Reer to “minister’s daughter item” above.

Mahaaa’ avail

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friendly.n Have the exibility to change work

practices with changing times.n Have a renowned and experi-

enced set of individuals on the

board to guide the destiny of thecompany with a missionary zeal.

n Have a management team at thetop that can be described as thebest.

n Have a team of motivated, disci-plined and committed work force.

n All decisions taken by the boardand senior management are gov-erned solely by what is good andin the interest of the company.

Air India, in today’s context, willpossibly falter on all counts. So, if theingredients for a dish given to themaster chef are not of good quality,

can he, howsoever good, turn out aclass product? This is the moot ques-tion that needs to be answered if AirIndia has to be salvaged.

Salvaging Air IndiaAs if these drawbacks were not suf-cient to ground Air India, Civil Avi-ation Minister Praful Patel has inrecent times been guilty of creat-ing confusion on the role of Air In-dia by stating ad nauseam that allairlines need to be treated equallyand that Air India need not enjoy aspecial place. The foremost action

that needs to be taken by the gov-ernment, in its capacity as the own-er, is therefore to redene Air In-dia’s role after being convinced thatit wants the national carrier to sur-vive. Should Air India function asa commercial airline like other pri-vate carriers or dierently (carrythe burden of social objectives)? If Air India is not to be allowed to op-erate on commercial lines, compari-son with private airlines on variousperformance parameters must stop.Such unwarranted comparisons takea heavy toll of the company’s imageand morale of employees.

More importantly, the governmenthas to rearm in no uncertain termsthat Air India is the country’s na-tional carrier; and shall remain so.While Patel can have his business in-terests in private airlines, as is thegeneral speculation, it is Air Indiawhich serves the nation on the so-cial platform. When Air India plac-es an order for aircraft on Boeing orAirbus it extracts an oset businessrunning into millions of dollars for

Indian companies. However, when Jet Airways and Kingsher place or-ders no such benet comes to In-dia. Numerous examples of this na-ture can be cited to demonstrate thelatent gains that Air India brings tothe country. For all the new ightsthat Air India operates at the govern-ment’s behest because it helps servebigger national interests, it must -nancially compensate Air India for it.

There are numerous government

policies that render Air India at adisadvantage in comparison to pri-vate airlines, viz., being accountableto over a dozen parliamentary com-mittees—on which several hundredhours of top management time arespent annually; adherence to gov-ernment policies and procedures,which besides being time consum-ing also come in the way of selectingthe best, etc. Today the governmenthas unfortunately created a scenarioas if Air India’s Maharaja is standingoutside the precincts of the nanceministry with a begging bowl forsurvival.

Managing it professionally One of the biggest myths perpetuat-ed over the years is that our PSUs, in-cluding Air India, enjoy full autono-my in their day to day functioning.If Air India’s survival has to be en-sured it should be the managementof Air India, operating out of Air In-dia building at Nariman Point, Mum-bai, taking decisions and not Ra-  jiv Gandhi Bhawan in Delhi, which

currently takes decisions on all ma- jor issues without a shred of account-ability. All key decisions—mergeraircraft acquisition, frequent changeof CEO, etc—responsible for Air In-

dia’s current travails were takenat Rajiv Gandhi Bhawan. If anyonethinks otherwise, he is only deceiving himself. In fact, the two parlia-mentary committees—the StandingCommittee on Transport, headed bySitaram Yechury, and the Committeeon Public Undertakings, headed byV Kishore Chandra Deo—have lambasted the civil aviation ministry onaircraft acquisition and merger, describing them as the two main issuesresponsible for Air India’s huge nancial losses.

Moving forwardAir India and erstwhile Indian Air-lines have in the past six decadesdeveloped core competencies in allaviation related elds—airport terminal services, cargo, MROs (maintenance, repair, overhaul) besidesof course the main business of run-ning airlines. Though separate Stra-tegic Business units were created atthe time of merger in 2007 no signicant headway has been made in thepast two years. All three elds haveenormous scope for generating addi-tional revenues, if operated as inde

pendent business units. If Capt Gopinath can set up Cargo 360 and makeit a success what prevents Air Indiafrom doing the same? Likewise, inthe elds of MROs and airport terminal services. Instead of being thenatural leader in aviation businessin India and the adjoining countriesAir India is being unfortunately pro jected as one which may not live tosee another day.

Air India, for most, isn’t a lost causeas yet. There are many Air India loy-alists who swear by it. But, for howlong? There is still hope provid-ed that Air India is freed from the

shackles of the government; is allowed to operate as a Board-drivencompany with no external interfer-ence; exploits its core competenciesin various elds and carry all its employees as a team without treatingthem as liabilities. Sooner it is donegreater the hope; later it is done, fast-er the sounding of the death knell. n

 Bhargava is a just-retired executivedirector of Air India.

The way Praful Patel’sdaughters are ordering AirIndia bosses around, seemslike they have not beenasked a simple question: Baap ka airline samjha

hai kya? 

It just Occurred tO us