Even as the Union government is gearing up to announce a second revival package for Air India (AI), Centre for Asia Pacific Aviation (CAPA), a leading aviation consulting firm, has said that the infusion of public funds must be supported by an accountability regime and this bailout has be accompanied by stringent conditions and oversight.
“Air India must be governed by an empowered and accountable Board. Two-three directors must be with deep strategic understanding of the business and proven credentials in commercial and planning domains and expertise in restructuring of large organisations,” CAPA said.
“The board and management must be ring-fenced from external influence and public funds should not be infused in the absence of a realistic restructuring and business plan,” it said.
Stating that a bailout package without comprehensive restructuring and a new and practical long-term strategy would be a strategic mistake, CAPA said global restructuring specialists should be appointed to develop a well-structured plan.
“Full funding of the carrier should proceed only after the plan is ready and has been accepted by the board and the management. Until such time, only limited, interim financing should be provided,” it said.
The restructuring mandate should include removal of Air India’s (AI) working capital debt from its balance sheet and divestment of non-core assets and real estate should be part of the business plan.
“Subsidiary activities such as ground handling, engineering and maintenance, catering and even Air India Express should be divested as part of the restructuring plan. Valuable real estate assets such as the Air India building in Nariman Point and the Vasant Vihar housing complex can also be monetised,” CAPA said.
Given the cost and competitive dynamics in the market, CAPA said the successful turning around of Air India would be extremely difficult. “Hence, a decision to provide significant capital funding in the absence of an empowered and accountable board and management, or a realistic restructuring and business plan, will be a major strategic mistake, and potentially very costly to the economy and the tax payer.”
It said the leadership team must be recast and an expat CEO accomplished in turning around struggling airlines should be hired. Alternatively, an accomplished executive from an Indian public sector unit, with a demonstrated track record in delivering results in difficult circumstances must be identified.
“This CEO will be responsible for stabilising Air India and preparing it for successful privatisation. Although the appointment of an expat CEO is unlikely, we believe that overseas candidates should be considered for other leadership roles, particularly the chief operating officer and head of planning. The chief commercial officer is another critical position.”
It said the next level of management should be groomed for progression.
