REBOOT
How to run an airline into the ground...
Over the years, I have interfaced with many chairman and seniorfunctionaries of Air India and Indian (Indian Airlines) to know thatany merger of the two organisations would pretty much end up in asorry state of chaos. Unfortunately for the merged entity NationalAviation Company of India Ltd (NACIL), things have gone according toscript. The merger has been an unmitigated disaster. It has resultedin nothing being achieved except leaving a trail of unpalatablelosses. Now the Committee on Public Undertakings has called a spade aspade and parallely called the bluff of civil aviation minister PrafulPatel whose grandiose idea has come a complete cropper.
By describing the illfated alliance as a marriage between incompatibleindividuals, the Kishore Chandra Deo headed COPU has called for actionagainst the agencies and individuals responsible for taking such awhimsical decision so that no PSU suffers such losses in future.NACIL's total debt is in the vicinity of Rs 16000 crore, interest costis Rs 6 crore per day, the wage bill is an astronomical Rs 3000 perannum since the employee base is 31000, employee per aircraft are 214against an international norm of 110, cumulative losses Rs 7200 crore,expected loss 8500 crore this year, total number of aircraft are 111 -68 and 43 Boeing and Airbus aircraft including a Dreamliner wereindented for during the good days; now NACIL has decided to delaythese purchases. These numbers offer a snapshot of a company well onthe road to peridition. From a doemstic market share of 41 per cent asrecently as mid 2000, the airline has been run into the ground. Theidentity and brand value of Indian Airlines lies in tatters as NACIL'sdomestic share is down to a shocking 17 per cent. So, if COPU saysthat Jet Airways, Kingfisher and Emirates have benefited due to this'whimsical decision', we better give credence to the comments.
NACIL was formed in May 2007 when the consultants Accenture had statedthat costs would be reduced by as much as Rs 500 crore per year due tothe merger. Forget the net gain in revenue of Rs 500 crore per annum,losses have ramped up in a scary manner. At the same time, Accenturehad talked about operational synergies coming out of the creation offive Strategic Business Units. Guess what in August 2009, when NACILand the civil aviation ministry decided to hold back salaries ofexecutives, the ghosts of the same SBU plan resurfaced. Since thecreation of NACIL, the airline has has seen four CMDS - V Thulasidas,Raghu Menon, Bharat Bhushan briefly and Arvind Jadhav - all IASofficers. This anomaly mirrors the state of National Highway Authorityof India which was similarly moribund under minister T Baalu in UPA 1,it had five chairman in three years. In terms of fleet, route,administrative, HR, operational and cost rationalisation or synergies,nothing has been achieved. At the time of giving a Rs 800 cr equitylifeline to NACIL recently, the Pranab Mukherjee headed GoM was notsatisfied with the execution of the fabled turnaround plan. Though itpromised a Rs 800 crore equity infusion in two six monthly tranches,subsequent infusion of equity is now subject to something concrete interms of execution of the cost saving plan. Since January 31, NACILdoes not even have an official spokesperson.
With its business in decline, the company is in disarray with nosemblance of order likely in the short term. With old guards in AirIndia and Indian stonewalling every attempt at integration, themaelstrom only gets more complicated. COPU has clearly articulatedthat the merger was thrust on the two unwilling entities. The COPUreport comes after a similar slam dunk indictment from theparliamentary standing committee on the merger. It is symptomatic of amalaise and when COPU says that there was no mechanism to ensureaccountability of the entire amalgamation process, it once againthrows into stark relief the need for government to get out ofbusiness. Praful Patel was seen as a reformer in UPA 1, but I wonderhow he will answer these charges levelled by COPU.
Guilty sir, yes very much guilty!
(All numbers have been rounded off.)
Afternoon Despatch & Courier
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