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Air India and Indian Airlines – sucking in public funds without any end




The Indian airline industry is going through a period of losses, where the competition between the various airline companies has led to severe losses for many of those involved. So, for example, Kingfisher is facing huge problems in running a full service network, and was unable to run the low cost converted Air Deccan. However, a lot of this is also due to the management and decision making within an organization, and if you consider the performance of the others such as Jet, Indigo and GoAir, you would start to think that the power of good management is key. Both Indigo and GoAir are seen as great performers and even in this loss making industry, they have turned in profits in the past.
The airline industry is a very strange industry, where there are huge capital investments in terms of buying new planes, the pilots to fly these planes are also typically very well paid compared to other industries, the portion of fuel in terms of expenses is very high, and you need to keep on flying planes in a tight turnaround to ensure that you are making more money than you are spending. Further, you need to keep your costs down without compromising on the many regulations necessary to ensure the safety of passengers.

So, what makes the difference ? It is the management. This did not matter too much when there was no private competition, with Indian Airlines flying domestic and Air India flying outside. People had no option; but like many other industries, there was the need to open this industry to private enterprises, and so it was done here as well. This led to many new companies coming up, some of which failed (remember companies such as Modiluft or East West Airlines ?). The reason to bring this up is that the worldover, there have been many companies that have failed in this sector, and it is a very tight sector.
Unfortunately, the status of these airlines has not been to be placed under professional management with skills in this area. There was a time when the management was professional, but that was a very long time back. Most of the recent history has seen decision making for the airline being driven by the bureaucrats at the Civil Aviation Ministry and the Minister in charge. So it was this group (along with the then minister Praful Patel) who decided that there was a need to bring about a merger. Now, a merger between 2 different companies is a tough thing to achieve successfully, with many failures the world over, and yet here was this decision being driven through in a manner that did not inspire confidence (this doubt was to be proved right, since the subsequent events have revealed that the merger was not planned properly, and there are problems even now).
In between, there was the thought that the planes were old, and there was a need to buy new planes, and incredibly large sums of money were guaranteed by the Government for these new planes, without adjusting the culture of the company, without evaluating whether the employee heavy nature of the company (the number of employees per plane is much larger than that of other airline companies, leading to a higher cost per flight) can lead to a turn around of the company. And so it has happened. The company has huge debts, loses more money than it makes, and is now again needing huge Government (taxpayer) finances for a turnaround, on which there is zero confidence based on the management skills (the Civil Aviation Ministry). Pouring more and more finances down the company is not going to work; there should be a huge debate on whether we really need to pour those large sums of money down a channel where there is no hope. Going by past performance, there really does not seem like any solution.




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