Friday, June 26, 2009

Killing an airline

Who benefits from A-I’s woes?

[Following is the editorial of the Statesman, 24 June 2009 that describes how Air India is being made sick. This is one of the lots of examples how the government of India help siphoning of the hard earn money of tax-payers to the pockets of big companies.]

Air-India employs more people than it needs to; indeed if there is an airline around the world that needs to slash jobs, it is India’s national carrier. With the same number of employees as Air China, it flies less than a third the number of passengers the Chinese carrier does. Lufthansa has thrice as many employees, but flies six times as many passengers. With less than half of Air India’s employees, Singapore Airlines flies one-and-a-half times as many passengers. Thai has 5,000 fewer employees, and flies nearly twice as many passengers. Air Canada has nearly as many employees, and flies thrice as many passengers. Based on these numbers, Air-India has at least twice as many employees as any international carrier.
In addition, Air-India has accumulated losses of Rs 4,334 crore, huge debts to repay, and no clear plan for survival. Worse, it has a minister named Praful Patel who has proved to be its worst enemy, a man who forced the airline to embark on one misadventure after another and after being re-appointed for reasons we are unable to fathom announced plans to shed a part of its equity to fund operations. Now, the man handpicked by the minister to head the airline says he wants employees to “rise up to the challenge” and accept wage cuts.
Is there method to the continuing madness? First, Air-India and Indian Airlines ordered lots of planes, one from Boeing and the other from Airbus. Then, Indian Airlines became Indian. Next, and amid orchestrated reports in the business papers that economies of scale could be achieved by merging the two carriers, Indian, which at the time seemed to be turning the corner, became part of Air-India. Minister Patel supervised this merger, with the support of the parliamentary committee for civil aviation that included Rahul Gandhi and Vijay Mallya, owner of rival Kingfisher Airlines.
The merger actually added to costs; IA managers were transferred from their former headquarters in New Delhi to A-I’s base at Mumbai, but preferred to maintain two establishments incurring huge costs by jetting between the two cities, using company cars and accommodation. Mishap followed misadventure. One plane backed off from the terminal without the aero-bridge having been disengaged. Another avoided a collision narrowly. The image of the airline plummeted; the once-proud Maharaja looked as shaken as on the day privy purses were abolished.
Now salaries are delayed, and Air-India’s new boss wants employees to accept wage cuts. The employees have threatened to strike work from 1 July. Who will benefit if this happens? Clearly, the airline’s competitors and leading the pack are Jet Airways and Kingfisher Airlines, headed by Minister Patel’s friends. Air-India’s financials will be hit, which will mean that the price of each share that the minister decides to offload will drop further. Who will buy these shares? Clearly it will be another airline, as it can benefit from Air-India’s new fleet, its extensive landing rights and other facilities. Air-India is being killed slowly. For whose benefit, we must ask.

Source: The Statesman, 24 June 2009.

No comments: