House panel slams A-I, IA merger

[This news describes how government has intentionally  made Air India, a nationalized company sick.]

NEW DELHI, 21 JAN: While recommending that the government write off losses suffered by Air India, a Parliamentary committee has asked for an inquiry into “faulty decisions” taken by the national carrier’s management, which have resulted in tremendous losses to it.
Pointing to numerous "irrational and misplaced" policy decisions, including surrender of lucrative routes to favour private players, the chairman of the 31-member committee, Mr Sitaram Yechury, said those who took these faulty decisions should be made accountable.
The panel was of the firm view that NACIL’s turnaround was “not possible by shifting the burden of the crisis on to the shoulder of the employees and blaming them for the ills of the company”.
It, therefore, has recommended that as a first step the government should write off the entire loss suffered by NACIL as the loss was due to the policy directions of the civil aviation ministry.
The only way of overcoming the problem is to change the often irrational and misplaced policy decisions of the government, the committee declared, in its report on the merger of Indian Airlines and Air India (in March 2007).
It noted that Air India dry leased four Boeing 777s for five years in 2006 whereas it was to get the delivery of its own aircraft from July 2007 onwards. “As a result, five Boeing 777s and 737s (each) were kept idle on the ground at an estimated loss of Rs 840 crore between 2007 and 2009,” it said. It recommended review of all lease agreements.
The panel found that services were being withdrawn from lucrative sectors by Air India’s holding company, National Aviation Company of India Ltd (NACIL), paving the way for introduction of services by private operators in the same sector. Expressing apprehension about a “possible nexus” operating to favour the private players, the committee has recommended a probe to analyse the withdrawal of lucrative routes both domestic and international to favour private players. It also recommended the creation of “an independent regulatory authority” to regulate the allotment of routes, bilaterals, social commitment of private players and operations on non-viable routes.
The committee said the merger between the two national carriers was taken in haste, without required homework and consultations due to which the entire process has been unduly delayed.
“In the process, it has given rise to so many problems concerning financial, administrative and operational, which could not be foreseen by the people who took this decision,” the committee said.
It also recommended that NACIL, which now runs the merged entity, should be converted into a holding company with NACIL-A and NACIL-I as “separate functional units”. ;SNS

Source: The Statesman 2 January 2010

http://www.thestatesman.net/index.php?id=317917&option=com_content&catid=35

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.

http://www.thestatesman.net/page.arcview.php?date=2009-06-24&usrsess=1&clid=3&id=291389