15 Oct 09 The Last Maharaja?

It is with a mixture of cynicism, despair and resignation that most Indians view the continuing fiasco at Air India (or Nacil). In a company that is grossly over-staffed, provides abysmal service quality and makes losses consistently, the specter of striking pilots is akin to absurd drama!

These guys figure amongst the top 1% of Indians, in terms of earnings. Sure, they’re highly specialised workers in a difficult job. However, if they don’t like it – why don’t they just leave? Their skills are highly marketable, and even in bad times, they will earn enough to stay within the top 1%.

Even more absurd is the Government of India’s determination to own and keep financing an un-viable and unnecessary business. Nobody even knows the extent of the losses, and estimates in newspapers range from Rs 5000 crores (Rs 50 b) to Rs 7200 crores (Rs 72 b) in FY09. In the last six years, the highest annual profit they recorded was a mere Rs 133.8 crores! That’s not even 2% of the last year’s losses. I can dig out more figures and ratios, but everyone knows that Air India is a loss-making machine of huge proportions, and this has only been exacerbated by the Indian Airlines merger.

A recent explanation trotted out by government and politicians that “even private airlines like Jet and Kingfisher are making losses”. But this is no justification at all. Private airlines are spending and losing their own or private money, while Air India is losing public money (read, yours and mine!), and that too without our explicit consent.

The latest bailout figure has touched Rs 7000 crores, but even this will only provide temporary relief! Doesn’t the Indian government have better things to do with our tax money, than throw it away on an airline? Aren’t farmers, and uneducated or unemployed or homeless Indians more worthy than pilots?

Or is it that we will not be able to fly across India?
Unlikely, since private airlines serve many, many more passengers.

Ultimately, this exposes a blind spot in India’s political thinking. Which is that PSUs are somehow, “holy cows”. Nobody wants to sell them. Even though nobody can justify why most of them should be run by the government!

But in the name of the “people”, these white elephants continue to exist, and suck out money that could be used in many other (more useful) ways. But who are these “people”? Are they pampered PSU employees? Such as pilots? Are they politicians (who can get free rides)? Are they Leftists who are married to an ideology that is obsolete?

Or are they the 1 billion plus Indians, who suffer in resignation, despair and cynicism?
Why don’t you ask these people… whether they want to fund a terribly-run airline business? Or many others that make no sense?

Arun Jethmalani

Arun is one of the founders of ValueNotes. Apart from trying to build a high-quality research business, he has spent the last 27 years researching, analyzing, and dissecting companies and industries. He has worked with clients of all shapes and sizes, from all parts of the world – in providing them insights that make a difference to their business.
Prior to ValueNotes, he was an equity analyst/advisor, and wrote extensively on investing – including a column titled “Value for Money” which ran for 10 years in the Sunday edition of the Economic Times. To this day, he remains an avid “value” investor.
He has also been published in several other publications, and is a regular speaker at events related to technology, investing, competitive intelligence, business process management, Internet, etc. See: Valuenotes Events
He has been instrumental in developing a community of research and intelligence professionals in India, and is the founder and current chairman of the SCIP (India) Chapter. Arun holds a B Tech from IIT, Bombay and an MS from Duke University, NC, USA. LinkedIn Profile

  • Alejandro Sol
    Posted at 03:10h, 03 August Reply

    You think Air India is bad (and it is), try British Airways! In the space of a decade the management have run the airline into the ground, teetering on the brink of collapse. Operating with huge debts and not making a profit. The British government has had to bail them out on numerous occasions (which means me, my neighbour, and his gardener!).

    I speak with personal knowledge of the inside workings of BA – I have a friend who is a senior 747 pilot, and know several cabin crew – the staff morale has all but collapsed, and the entire airline is just too management top heavy. You have managers that manage managers, who manage other managers!! It’s a nonsense and somewhere along the way they’ve forgotten their core mission – to fly passengers comfortably around the world, which common sense would tell you means more pilots, planes, and cabin crew.

    BA have never recovered from their heyday in the late 80s and early 90s, and since Concorde was withdrawn from service (prematurely in my opinion) they have lost prestige and the will to provide good service. Having a chairman who has adopted aggressive American-style management practices hasn’t helped either. Willy Walsh (BA CEO) is universally detested and not respected by the vast majority of flight staff.

    Having said that, I had the pleasant experience of flying with Kingfisher to Mumbai and it was the best airline service I’ve had in many a year. There was an ethos of wanting to please and putting the passenger first. Let’s see how long that lasts.

    Can’t see AI or BA lasting much longer.

  • admin
    Posted at 19:19h, 13 January Reply

    Thanks for the comments. However, just because Continental has problems, doesn’t mean we can exonerate Air India.

    In fact, this might well prove the point that governments should stay out of running or funding these businesses, and use taxpayer money elsewhere. What do you think?

  • Sid
    Posted at 17:35h, 12 January Reply

    Sorry had the wrong URL for the second link. Here it is: http://blog.cleveland.com/business/2009/01/continental_airlines_posts_266.html

  • Sid
    Posted at 17:31h, 12 January Reply

    If you think Air India is bad, try flying Continental Airlines – they will make Air India look like a luxury airline. I flew Continental during my last 2 trips to India and they suck ass.
    Flight delays for over 18 hours (close to one day), flight cancellations etc etc.
    BTW $1.6 billion (Rs 7200 crores) pales in comparison to what the US govt gave in the amount of $18 Billion to the top US airlines (including Continental) in 2001 in bailout. See http://www.propublica.org/special/government-bailouts
    And yet they still continue to show losses ($266 million in the case of Continental. See http://www.propublica.org/special/government-bailouts
    So there is nothing unique about Air India.

  • Jignesh
    Posted at 21:53h, 05 January Reply

    How can you say that AI or IA have not taken a single pie from the government? Who is paying their bills, then?

  • P C Chopudhury
    Posted at 09:30h, 06 November Reply

    It is clarified by the Minister as well as AI management that AI or IA has so far not taken a single pie from the government. This would be the first time that it had asked the government for a raise in the equity base which is imperative as the government is the owner of the airline. Besides, let this Airline be let to run on its own and we may see an improvement. It is wrong to accuse AI employees for the policies and processes adopted by its management. Ti bring in the latest processes and policies has to be done by the management not the employees. Employees are bound by the processes adopted by the management.

  • pankaj
    Posted at 10:40h, 05 November Reply

    The airlines all over the world is bleeding , but the government decision to merge the two national carriers was not wise decision , both the airlines had different work culture , different payscale and different platform for functioning , the ministry must have solved the differences before merging he 2 national carriers , but the country could be held ransom without the national carrier , one must not forget the same national carrier evacuated 14 lakhs indians during the iraq war while many day to day operations were cancelled , operates numerous charters for bsf / army jawans , just imagine naresh goyal or vijay mallya sparing their aircraft or manpower for one such cause , if there is no air-india , the country certainly will be held for ranson , after all air-india operates for national obligation and the others are purely in the business for ???? ( sny guess )

  • Aditya
    Posted at 23:11h, 03 November Reply

    I believe it is the politicians + their families (include a couple of wives, a bunch of children, a handful of brothers and sisters in law, couple of pairs of parents and some more)… who would not get to fly free anymore if there is no government airliner.

    Indians are better without Air India because for a comparison, AI has just about 35 aircrafts that fly international to about 30 destinations, while Jet Airways has about 84 aircrafts that fly to about 24 and increasing number of destinations!

  • Joseph
    Posted at 18:29h, 03 November Reply

    You don’t know about India and its people. Democracy in india is a farce where votes are bought, corruption in law making agencies is rampant.

  • Andrew
    Posted at 22:21h, 30 October Reply

    It’s a mystery why you Indians tolerate this kind of mis-governance? Aren’t you guys supposed to be in a democracy?

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