Air India in Turbulence The fourday strike of Air India executive pilots was called off on assurance by the Aviation Minister that their productivity linked bonus (PLI) would be restored without cut and issue referred to a committee which would include representatives of the pilots. Reported loss of Rs. 100 Crores in 4 days! In my opinion it was an avoidable big fiasco. No Strategic Plan: What was the game plan of the management? Did not they expect the pilots to go on strike? If yes, then what was the game plan? Or, in fact, to me it seems they did not have one except posing to be tough as the statements of shut down indicated. What is it that the committee, including representatives of pilots, would arrive at which could not have been done without going through the strike option. It reflects a lack of consultative process required to get pilots to agree to PLI cuts before issuing the fiat. If the cut was unacceptable it was foregone conclusion that the pilots would go on strike. Wasn’t adequate home work done at board level while issuing PLI cut order of September 24 which had to be kept in abeyance on September 27? In any case such issues of bonus schemes etc have to be approved by the board in public sector. Who is then responsible for loss of Rs. 100 crores in four days for the airline already on ventilator? Of course this is peanuts considering losses of Rs. 7200 crores as on March 31, 2009. The Aviation Minister normally is the face of Air India and he should take responsibility for the fiasco. Productivity Linked Bonus: Salaries and perks of the pilots are highest amongst any professionals at the operating levels. Air India amongst all the airlines of India is worst loss making entity. It is true that to get good quality pilots they have to pay the
best in industry. Having assets of aircraft worth billions of dollars, one has to make sure they fly reliably and safely. So Air India, as a business enterprise, has to nurture both the precious assets aircrafts and the pilots. But it ends there and the ground reality overtakes the issues of the pilots on strike. For an airline beset with massive losses, irrevocable commitments to take delivery of aircrafts on order, poor cash flow which can not even ensure payment of salaries, the first priority is survival and not bonuses for executive pilots. But pilots seem to have taken a leaf from US bankers that bonuses are priority even if business has to shut down! High Employees per Aircraft Ratio: The employees must be made to understand the reasons for such situation. It is not just the slow down which has created this problem. It is accumulated work culture of Air India and Indian Airline which has become a millstone around the neck of the management. The employees to aircraft ratio of about 276 for Air India does not stand up to the standards of international and successful air lines like United of USA with 120 employees per aircraft. Let the employees not try to emulate Pakistan’s PIA ratio of 476! In my opinion the only single parameter which should drive sustainability of an airline is employee to aircraft ratio since that defines the fixed costs and therefore the breakeven point. The modern technology in the air as well as on the ground makes so many people redundant. Air India has been upgrading the technology in the air but has failed to catch up with cost advantages of technologies available for operations on the ground. Transition Case Study of Satyam Computers: Air India needs massive & ruthless reduction in their manpower. Every day they fly at this high ratio, they are adding losses which can not be recovered in future. If by virtue (!) of being in public sector, Air India can not axe the manpower, the next best thing to do is to sell off the airline just like Satyam. The best thing government did in case of Satyam was that it kept away, after appointing the professional directors to chart the course for future. The transition was definitely a well handled business management case study for the government to adopt. The lesson for the government is to get out of running the airlines and handover the management to private sector
professionals including employee shareholders. If Jet Airways and Kingfisher can do it why not Air India? Lesson from Private Airlines: Talking of private sector, even Jet Airways have had their share of problems with losses for couple of years. However, they have restructured significantly and repositioned themselves successfully with Jet Konnect. Their employee per aircraft ratio of around 130140 notwithstanding, they took salary cuts at top levels and set examples. They also cut down manpower by about 2000 employees. The executive pilots on strike had raised possibility of uniting with their counterparts in other airlines. That would be a great idea in my opinion. Strange it may sound, but then peer reviews do help and the pilots would be forced to compare and accept the need to bring down the supporting manpower for keeping aircraft in the air. Let them compare the salaries, perks and all the performance parameters before that put in sick leave applications in future! They can’t just expect only salaries & perks ignoring operating realities. Air India is a classical victim of “Value Management Deficiency Syndrome”. The management has failed to monitor the values important for running an airline and performance to contain various ratios crucial for airline operations within preset limits and overcome the deficiency. Restructuring for Survival & Turn Around: Air India should restructure the organization with the best of available manpower out of present employees with ratio of say 130150 and declare the rest as surplus with offer of VRS. Those who do not opt for VRS & with no work allocations may draw their salaries without any pressure to quit. They will get fed up of no work & only salaries and start looking out for jobs else where. Sure way of managing the optimization of manpower within a year without punches of the leftists. But this is not without pitfalls as idle mind is devil’s workshop and one must be ready to face the situation firmly.
No serious turn around plan for Air India can be without bitter pills hard to swallow. The new bench marks have to be reset and the organization has to be restructured to achieve the same. And let us not forget the ground reality that even the best of the airlines with least ratio of employee per aircraft are also facing tough task due to global slowdown. There can be no turn around strategy bereft of manpower reduction. Political will to turn around has to be supplemented with ability to take tough decisions. More important is to standby the decisions taken come what may. Our politicians are used to either rolling a red carpet or brushing under the carpet or a magic carpet of Sindbad. If cornered, they prefer to roll back the carpet and decisions. So it would take real conviction & commitment to be serious about turning around Air India. Actual turn around is second issue! Vijay M. Deshpande Corporate Advisor, Strategic Management Initiative, Pune October 2, 2009 Scroll down to visit my other blogs Or Click on www.starmi.com