An elusive turnaround

The more the government gets into it, the greater the mess Air India seems to become. None of the plans hammered out till now, including the ill-advised merger of the two national carriers, has succeeded. The Centre has been in emergency response mode for years, pumping in small doses of equity and loans to keep Air India alive and permanently in the red. Last week, the Union Cabinet cleared a Rs. 30,000 crore restructuring plan for the airline, to be implemented between 2012 and 2021. This includes an upfront equity infusion of Rs. 6,750 crore, and assured equity support of over Rs. 23,000 crore over nine years. The government will also guarantee non-convertible debentures for Rs. 7,400 crore. Given the Centre's own financial crunch, this is a major financial commitment. The immediate benefit for the struggling and virtually grounded airline will be the induction of 27 Boeing 787 ‘Dreamliner' aircraft, whose acquisition has been delayed by three years, at least in part, because of the financial crisis in the organisation. Perhaps, the employees will now start getting their salaries, may be in instalments. The consortium of banks has also cleared the turnaround plan by converting working capital and other loans into medium and long term debts, with a moratorium of one to two years.

But the more significant element in the Financial Restructuring Plan (FRP) relates to the hiving off of two main business arms — ground handling and Maintenance, Repairs, and Overhaul (MRO). The government, under the FRP, hopes to rid the airline of about 12,000 employees to the ground handling unit and another 7000 to the MRO, thereby reducing the staff strength of Air India to approximately 11,000. The objective seems to be to develop these two services as independent, strategic business units that can become profitable on their own. It is quite likely that Air India will enter into joint ventures to run these units as profit centres. The fundamental question remains: Has Air India consulted its employees and unions on the FRP and other plans to make it succeed? It should not remain, like the merger issue, a thorn in its flesh that could lead to further illness. Though the Cabinet has given its nod for FDI in the airline sector, it is very doubtful if the state-owned Air India can ever attract a suitor in the present circumstances. Worse still, the ability and capacity of the state-owned and politically influenced airline to implement a stringent FRP itself remains doubtful. Unless Air India gains autonomy to function as a viable, commercial airline without political interference, such ambitious plans can hardly succeed.