Monday, June 29, 2009

Maharaja(Air India) fights for Air

Maharaja (Air India) which once dominated Indian skies is now fighting with all its means for survival. Air India is the brand owned by state run National Aviation Company of India Ltd with approximately 31000 employees and now making a loss of 15 crore/day up from 11 crore/day on last year. This will results in an annual loss of 5100 crore. Losses in 2008-09 was 4000 crore and in 2007-08 it was 2226 croore with an annual salary bill of 3000 crore.

The troubles for the airline major is due to economic crisis, flying in the unprofitable routes, human resource mismanagement etc. Air India have one of the higest number of people/ aircraft in the world. In order to justify this number airline have to expand its fleet, but GOI took one full decade to accept the strategy of expanding the fleet. In the end when the fleet is really going to expand as boing and airbus are delivering the new aircrafts to AirIndia, National carrier doesnt have any capaity to accept it.

Not only this the cabincrew recruited before 2004 work on average 50-55 hours/week where as international normsis 70 hours. Pilots flying in international sectors are paid in Dollors, stay in five star hotels when on duty, salso making some 7lacks/month. Besides this employees will get an incentive allowence that is not linked to AirIndia's productivity. Engineers in AirIndia with 15 years of Experience make 2 lack/month through their productivity is estimated to be 40% to the international norms.

Not only this national carrier is also forced to operate on such routes which is inherently loss making. Amid of all these things they are planning to expand their fleet with new aircrafts from Boeing and Airbus which will replace the old ones. But now the carrier is facing a deep financial crisis which forced them to deffer salary payment by 15 days and senior staffs are being asked to skip the salary for June in a voluntry basis. A four member commite is also set up to reduce the wage billl by 16% or 500 crore.

Just like many US companies AirIndia too asked the government to bail out the company from this crisis. Naturally government will step forward some condition for bailouts in order to perform better. Here goverment asked the company to 1. Rethink about the expansion plan, 2. Scrap the PLI scheme, 3. Cut the staff strength. Management already said that they will not cut the staff strength. The second option is cutting the salary which is already rejected by Air India's 6 odd unions after meeting with Chairman and MD.

Any way the management will move forward with there scheme to reduce the wage bill. Remenber that Singapore Airlines Pilots agreed to take pay cutsand non-paid leaves just because net profits are down by half(but still making profits). Air India is constantly losing market share to Jet and Kingfisher which provides premium services. Now its owns 17.4% of domestic market and 23.5% of international market.

This is the case waiting for all other state owned companies if they are not looking for new ways and better performance and above all with customer centric approch. They have examples examples to follow like LIC and Indian Railways before them to change and adopt new things. They have to learn the lesson that in this globalised world customer is the primary focous. The main reson for the existence of Air India is that there are some people to travel by air, if Air India is not treating them in a good way other airlines are there.


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