Uneasy numbers stacked against Air India
State-run Air India, which enjoyed a monopoly in the country till the deregulation of the aviation sector in 1991, is besieged by ballooning debt and a litany of woes, pushing it to the brink of collapse.
Unless, of course, the central government steps in to bail out the national flag carrier.
Air India is now seeking a 39.81 billion rupees package from the state, though the airline has been asked to come out with a plan of action to make its existence viable.
The money may come as federal aid in the form of equity and loan.
But some say the airline needs a credible action plan to rescue it.
The civil aviation ministry says the 31,000 workforce should be trimmed to keep it viable. Estimates put the average number of employees per aircraft at nearly 1:230, while as per international standards, an airline needs 1:100 -150 employees.
Others question whether the ministry, which presides over the National Aviation Company Ltd created to run the merged Indian and Air India, can absolve itself from the faultlines posed by the bloated workforce.
Complimentary travel in business class for its employees is one of the perks authorities seek to curb. How much would such a measure help the carrier?
But is the high employee-aircraft ratio the sole reason for the airline’s woes, though it accounts for 40 billion rupees as wages annually for the troubled airline?
Air India’s debt in June 2009 more than doubled to 152 billion rupees from 65 billion rupees in November 2007. And that was mainly due to massive aircraft orders placed by the beleaguered firm with aircraft makers — 68 with Boeing and 43 with Airbus.
The orders were placed when the country was beginning to witness an aviation boom, but some analysts say the airline did not have the much needed aircraft when it really wanted them.
The opposing point of view is that you always need aircraft to catch up on a boom next time around.
Forty-nine aircraft have been received so far, but the aviation boom did not last long enough to justify the huge orders for the struggling airline, which placed orders worth nearly 440 billion rupees.
Four out of ten seats are vacant now, but that statistic can be tagged to many airlines as a global economic recession and soaring oil prices dented appetite for air travel.
Were the additional aircraft ordered without properly identifying the potential?
Nearly 30 airlines have become defunct globally in the past one year alone.
Now, wonks seek a renegotiation as part of the umpteen measures needed to lift the sagging fortunes of India’s state-run airline.
But any cancellation or deferring of placed orders would also invoke some penalty from aircraft makers.
Air India’s international market share dipped to about 18 percent in the last fiscal from 21.7 percent a year ago, while a percent of its domestic market share also declined to touch 16.9 percent in the period.
Airline passenger numbers dipped about 8 percent in the first half of 2009, adding to the mountain of woes faced by Air India.
In punctuality too, Air India’s domestic service stood fourth with a 75.7 percent record, behind Indigo (87 percent), Jet Airways (86.4 percent) and Go Air (83.4 percent).
Many bilateral agreements also allegedly ceded Air India’s market share to foreign air lines, while some huge revenue earners like ground handling operations in Bangalore and Hyderabad were gifted on a platter to foreign players.
Aviation experts say the merger of Air India and Indian also did not have the desired impact.
So what would a turnaround for the airline involve?
Many say it will surely be a herculean task for the top brass of the airline. They are charting a rescue plan which would be whetted by SBI Caps before it is placed to the federal government for approval.
Can privatisation revive the dipping fortunes of Air India? Does it need aviation experts rather than bureaucrats to pull off a turnaround?