All is not lost for
Air India, not yet.
But to save it we need to be convinced the national carrier must survive, then we
must redefine its role: do we want it to be a commercial airline or a social one?
Jitender Bhargava
A
ir India, an institution
which once evoked enor-
mous pride in Indians be-
cause of its superlative
performance globally, has indubita-
bly fallen on bad days. Its ability to
survive has become a subject matter
of animated discussions which in a
way also reflects the significance of
this corporate entity. Companies can
exist; companies can perish. With
Air India, however, people in the
country have had an emotional bond
and therefore few would like to see it
go 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 out
of the opening of Indian skies in
the nineties. The argument, though
right to an extent, does not, howev-
er, fully justify the factual position.
A dispassionate study of companies
worldwide, across all industrial sec-
tors, which commenced operations
in the first half of the last century,
would reveal that not many have
flourished in the intensely competi-
tive environment. The current state
of Air India is therefore certainly not
an isolated case. Numerous compa-
nies of Air India’s vintage have ei-
ther perished or are struggling to
survive—a far cry from the days
when these companies commanded
leadership in their respective indus-
trial sectors. This declining trend in
their fortunes can best be attributed
to what I would like to call an ‘ear-
ly-mover disadvantage’. Companies
that have emerged in the last two
decades have been found to be ad-
vantageously placed with regard to
productive work practices, focus on
customer, sound financial manage-
ment, aggressive marketing strate-
gies, etc. vis-a-vis companies of the
earlier era because they have had
The first-class cabin of Air India’s
B777 (above) is among the best in
the industry, yet occupancy is poor
because the government gives free
upgrades to even ex-ministers and
former secretaries for life! Photo
courtesy: Jitender Bhargava
their baptism by fire in the market
place unlike the companies of yester-
year, which were born in a monop-
oly era, and therefore had policies
and practices to suit the environ-
ment that then existed.
Early-mover disadvantage
The study will further show that in
most cases the later a company has
been established the better has been
its performance and ability to adapt
to changing requirements of cus-
tomers. This can be illustrated by
taking the example of the auto sec-
tor. Hindustan Motors and Premier
Automobiles have been in the busi-
ness of manufacturing cars since the
www.GovernanceNow.com 31
 people politics policy performance
PSU Misgovernance
fifties and the sixties. How do these
companies rank today in the auto-
mobile sector with respect to their
peers? How good are their cars as
compared to those produced by
companies that set up their assem-
bly lines in the nineties and in the
current decade? The response is
so obvious that it need not even be
stated. The two companies referred
to have been in the private sector
where organisations enjoy relatively
greater flexibility 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 been
afflicted by the ‘early-mover disad-
vantage’ syndrome. In fact, look up
any sector and the companies that
emerged at the time of India’s inde-
pendence or soon thereafter and you
will have several instances of com-
panies meeting the fate akin to that
of 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 today
except that it is paying the price of
being a company cast in the mould
of yesteryear. Remember brands
like PANAM, TWA, Chrysler and Gen-
eral Motors, which once generated
awe, but have either perished or are
no longer regarded as leaders. This,
however, is not to suggest that no
company of yesteryear has survived
or can flourish. Mercedes is still a
much sought-after global brand.
Closer home, Tata Steel continues to
lead the steel sector in spite of be-
ing over a century old. The credit for
such institutions goes to the vision
their respective managements have
had; the re-engineering of work pro-
cesses on an ongoing basis that they
undertook, their keenness to always
stay 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 competitive
market? ‘No’ would be the obvious
and emphatic answer. Besides be-
ing a victim of the ‘early-mover dis-
advantage’ phenomenon it also has
all the drawbacks of being a gov-
ernment owned company. As a pub-
lic sector undertaking, Air India
has to work within the framework
32 GovernanceNow | May 1-15, 2010
prescribed by the owners that is
simply not conducive for efficient
functioning.
For better understanding and an
impartial conclusion on Air India,
one can look at any other sector,
where both government-owned and
private companies are operating:
Reliance and ONGC in the field of oil
exploration, Airtel and BSNL in the
telecom sector, Airports Authority of
India and GMR/GVK for running air-
ports. Few, if any at all, government
sector companies can claim to be
performing better than their private
sector counterparts on any of the key
performance parameters.
Government ownership a drag
If viewed in the context of the above,
it will be grossly unfair to expect Air
India to emerge as a market leader
by having a product that can match
that of competing airlines. When a
discerning customer looks for value
for money while buying a ticket, Air
India can naturally not be his first
or second choice. And if a company
cannot feature as a top of the mind
product it will undoubtedly lose out
on premium passengers and reve-
nue. In this reality, which should be
obvious to most, lies the cause of Air
India’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 would
continue to bleed and be seen gasp-
ing for breath. Nomination of corpo-
rate bigwigs from the private sector
and appointment of an expat chief
operating officer can best be de-
scribed as cosmetic actions with no
significant results likely to emerge
from them. If the government, in its
capacity as the owner, is serious in
its desire to see Air India prosper, it
will have to free the airline from its
shackles as a first step. Don’t get me
wrong, we are not talking privatisa-
tion here, but operational freedom.
Litmus test
What are the factors that distinguish
successful companies from others?
Successful companies are profes-
sionally run; they have a well-delib-
erated business plan, etc. In other
words, they:
n Operate as a commercial entity.
n Have work practices that are pro-
ductive, efficient and customer
Maharaja’s travails
4 AI-IA merger decision was “whimsical”
March 13: The Committee on Public Undertakings
(COPU) lambasted the decision to merge AI and Indian
Airlines and asked the government to have separate
domestic and international airlines under a single
holding company. It also recommended fixing of re-
sponsibility on “agencies and individuals” who took
such a “whimsical” decision and sought “suitable
action” to prevent “intangible loss”. These remarks
came after Air India recorded a loss of Rs 5,400 crore
in 2009-10. The current fiscal estimates are upwards
of Rs 7,000 crore.
4 “Give more autonomy to AI”
April 22: The Standing Committee on Transport, Tour-
ism and Culture asked the government to grant more
autonomy to the national carrier and “not impose its
decisions” on the ailing airline. It also asked AI to
“put its act together as early as possible for reclaim-
ing its ‘Maharaja’ status”.
4 IPL Carrier Service
April: A Delhi-Coimbatore AI flight scheduled to leave
on the April 20 morning was aborted less than 12
hours before its departure and the aircraft was de-
ployed as a chartered flight from Chandigarh to Chen-
nai. Who were these special customers? Civil aviation
minister Praful Patel’s daughter Poorna, who is ‘hos-
pitality manager’ for Indian Premier League and some
cricketers. That was just one more episode from the
IPL controversy. AI bosses maintained that diverting
the aircraft was a commercial decision. It’s possibly
thanks to such “commercial decisions” that the airline
is where it is today.
4 Minister’s other daughter
Poorna’s sister too is not to be left behind. When Avni,
her husband Prashant and in-laws were going to the
Maldives, AI deployed a larger than scheduled aircraft
to ensure business-class seats for them, according to
a report.
4 Worst is over: Patel
April 13: AI is charting the recovery path, says civil
aviation minister Praful Patel. “Earlier the losses were
in the average of Rs 400 crore per month. Now these
have started coming down by at least Rs 100 crore per
month,” Patel said. “The worst is over and Air India is
continuing on a path of recovery.” Let’s hope so. More
sound bytes from the minister: “Certainly things are
looking much more controlled than two months ago.
4 Freebies for ex-ministers
April 29: Nothwithstanding finances, the government
has decided to give former ministers, secretaries as
well as their family members life-long upgrades to
first class tickets on AI. Patel told the Lok Sabha that
such facilities will not add any burden on AI or other
agencies and “will be extended only if vacant seats
are available”. That of course, is clever officialese.
Ministers and babus are never known to have been
denied. Refer to “minister’s daughter item” above.
 friendly.
n Have the flexibility 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 the
company with a missionary zeal.
n Have a management team at the
top that can be described as the
best.
n Have a team of motivated, disci-
plined and committed work force.
n All decisions taken by the board
and senior management are gov-
erned solely by what is good and
in the interest of the company.
Air India, in today’s context, will
possibly falter on all counts. So, if the
ingredients for a dish given to the
master chef are not of good quality,
can he, howsoever good, turn out a
class product? This is the moot ques-
tion that needs to be answered if Air
India has to be salvaged.
Salvaging Air India
As if these drawbacks were not suf-
ficient to ground Air India, Civil Avi-
ation Minister Praful Patel has in
recent times been guilty of creat-
ing confusion on the role of Air In-
dia by stating ad nauseam that all
airlines need to be treated equally
and that Air India need not enjoy a
special place. The foremost action
that needs to be taken by the gov-
ernment, in its capacity as the own-
er, is therefore to redefine Air In-
dia’s role after being convinced that
it wants the national carrier to sur-
vive. Should Air India function as
a commercial airline like other pri-
vate carriers or differently (carry
the burden of social objectives)? If
Air India is not to be allowed to op-
erate on commercial lines, compari-
son with private airlines on various
performance parameters must stop.
Such unwarranted comparisons take
a heavy toll of the company’s image
and morale of employees.
More importantly, the government
has to reaffirm in no uncertain terms
that 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 the
general speculation, it is Air India
which serves the nation on the so-
cial platform. When Air India plac-
es an order for aircraft on Boeing or
Airbus it extracts an offset business
running into millions of dollars for
It just
Occurred to us
The way Praful Patel’s
daughters are ordering Air
India bosses around, seems
like they have not been
asked a simple question:
Baap ka airline samjha
hai kya?
Indian companies. However, when
Jet Airways and Kingfisher place or-
ders no such benefit comes to In-
dia. Numerous examples of this na-
ture can be cited to demonstrate the
latent gains that Air India brings to
the country. For all the new flights
that Air India operates at the govern-
ment’s behest because it helps serve
bigger national interests, it must fi-
nancially compensate Air India for it.
There are numerous government
policies that render Air India at a
disadvantage in comparison to pri-
vate airlines, viz., being accountable
to over a dozen parliamentary com-
mittees—on which several hundred
hours of top management time are
spent annually; adherence to gov-
ernment policies and procedures,
which besides being time consum-
ing also come in the way of selecting
the best, etc. Today the government
has unfortunately created a scenario
as if Air India’s Maharaja is standing
outside the precincts of the finance
ministry with a begging bowl for
survival.
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 management
of 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—merger,
aircraft acquisition, frequent change
of CEO, etc—responsible for Air In-
dia’s current travails were taken
at Rajiv Gandhi Bhawan. If anyone
thinks otherwise, he is only deceiv-
ing himself. In fact, the two parlia-
mentary committees—the Standing
Committee on Transport, headed by
Sitaram Yechury, and the Committee
on Public Undertakings, headed by
V Kishore Chandra Deo—have lam-
basted the civil aviation ministry on
aircraft acquisition and merger, de-
scribing them as the two main issues
responsible for Air India’s huge fi-
nancial losses.
Moving forward
Air India and erstwhile Indian Air-
lines have in the past six decades
developed core competencies in all
aviation related fields—airport ter-
minal services, cargo, MROs (main-
tenance, repair, overhaul) besides
of course the main business of run-
ning airlines. Though separate Stra-
tegic Business units were created at
the time of merger in 2007 no signifi-
cant headway has been made in the
past two years. All three fields have
enormous scope for generating addi-
tional revenues, if operated as inde-
pendent business units. If Capt Gopi-
nath can set up Cargo 360 and make
it a success what prevents Air India
from doing the same? Likewise, in
the fields of MROs and airport ter-
minal services. Instead of being the
natural leader in aviation business
in India and the adjoining countries,
Air India is being unfortunately pro-
jected as one which may not live to
see another day.
Air India, for most, isn’t a lost cause
as yet. There are many Air India loy-
alists who swear by it. But, for how
long? There is still hope provid-
ed that Air India is freed from the
shackles of the government; is al-
lowed to operate as a Board-driven
company with no external interfer-
ence; exploits its core competencies
in various fields and carry all its em-
ployees as a team without treating
them as liabilities. Sooner it is done,
greater the hope; later it is done, fast-
er the sounding of the death knell. n
Bhargava is a just-retired executive
director of Air India.
www.GovernanceNow.com 33