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India's airlines in a
tailspin
By Arun Bhattacharjee
NEW DELHI – Flying aboard one of India’s
national carriers can be a serious ordeal. On one
flight, a passenger on his way to Hong Kong from Delhi
found himself sitting in a seat with a broken back. Any
attempt to put the seat back to a rest position pitched
the passenger virtually into the lap of the passenger
behind him. The passenger spent the flight sitting up
straight.
That isn’t unusual. Aircraft are
increasingly shabby, flight attendants are slovenly,
delays are endemic. Restrooms are often filthy, an
enormous comedown especially for Air India, the
international carrier which three decades ago, with nine
aircraft flying to 21 destinations, was regarded as the
world’s fifth best airline in services, food and on
flight schedules.
India’s two government-owned
flag carriers, Indian Airlines and Air India, are in
trouble. If the government wants to save them, it must
invest an estimated US$20 billion and introduce
professional management practices without political
interference, analysts say.
But apparently no
one knows if India is ready to do that.
Two
corporate bodies, the Federation of Indian Chambers of
Commerce and Industry (FICCI) and the Confederation of
Indian Industry (CII) ask, “Can India avoid doing it?”
The history of the two sick airlines spans three
decades of neglect, underinvestment, politics and trade
union pressure. As operational costs have mounted,
market share has dived. The last blow was the country’s
“open sky” policy, in which private airlines were
permitted to compete with the harnessed national
carriers.
In the last two decades only a few
aircraft have been added to Air India’s lease, but basic
fleet strength has not increased more than 20 percent.
As Air India’s operational reach has shrunk, Indian
Airlines has been allowed to take over short-haul
operations such as Dubai, Malaysia, Singapore, Myanmar,
Maldives, Colombo and Mauritius. Last week Air India
failed in an attempt lease one 747 from Korean Air Lines
as it did not have enough funds, and found that KAL was
raising its leasing charges because of doubts about Air
India’s capacity to pay.
The problems stem
partly from a decision by the Ministry of Civil Aviation
to allow Indian Airlines to expand overseas as it
continued to lose its domestic market to the privately
owned Jet Airways, but its competitive edge in the
overseas market was blunted by government moves to ban
fare flexibility. These, coupled with poor investment
and haywire schedules, have shrunk Indian Airlines’
share of Indian passengers from 60.5 percent in 1998-99
to 45.9 percent in 2003.
The average age of
Indian Airlines’ aircraft does not inspire passenger
confidence either. Its 11 Boeing 737s were 21.9 years
old in July and its Airbus 300 fleet 21.3 years old
against a Jet Airways fleet average of only 2.98 years.
Even the age of Indian Airlines’ relatively new Airbus
A320s varies between 7.3 and 12.8 years.
India’s
open sky policy brought in new competitors in the market
but not all of them have survived. Among the noted
casualties are Modi-luft and Damania, but the survivors
are doing far better than their government-owned
brethren. Jet Airways has increased its capacity by 63
percent, Sahara Airlines by 156 percent. In addition,
no-frills regional operators such as Deccan Airways from
Southern India are entering the market to further
whittle the market share of the national
domestic-cum-short haul overseas carrier. (see Plain
flying arrives in India, Oct. 1, 2003,
http://www.atimes.com/atimes/South_Asia/EJ01Df08.html).
Indian Airlines was formed in 1953 when the
government nationalized three private airlines. After a
40-year monopoly and 50 years in the air, the company is
in a tailspin. The plan to revitalize it is stalled, as
no government decision has yet been made to spend even
the first US$2 billion of the projected $20 billion to
purchase new aircraft. As the government vacillates,
representatives of both Boeing and Airbus have
established permanent camps in the capital, offering
competitive prices and free service packages, so far to
little avail.
It appears that the Indian
Airlines board’s earlier decision to purchase 43 Airbus
aircraft (A319, A320 and A321) is on hold. Even a lease
proposal for five A320s in 2003-2004 has not been
cleared. Indian Airlines flies 53 aircraft - four A300s,
38 A320s and 11 Boeing 737s.
A senior management
official blames a government policy of making Indian
Airlines do national service by operating unprofitable
routes, which takes its toll on profit margins. He
points out that Indian Airlines flies to 11 northeastern
destinations while private operators fly only to only
five. While Indian Airlines operates 129 services per
week on unprofitable routes, the private operators fly
only 35. Although the national carrier has a social
responsibility to serve the remote areas, he says, the
government’s operating license to new airlines mandates
a mixed package of routes.
Flush with $86
billion in foreign reserves, India today is in a
position to revitalize its Indian Airlines fleet but a
bitter controversy over privatization of both Indian
Airlines and Air India with foreign equity is apparently
holding up its resuscitation. Singapore Airlines and a
few European airlines such as British Airways and
Lufthansa are known to have shown interest to invest and
participate in the management team.
Many are
piqued by fact that C M Abraham, from Karnataka State,
then the Minister of Civil Aviation, held back Indian
Airlines’ expansion while favoring Jet Airways, financed
by Dubai-based business tycoons in cooperation with the
Emirate Airline. Allegations were raised in Parliament
that Ibrahim was showing undue favor to Jet Airways
although no formal inquiry was undertaken.
Equally mysterious is the government’s refusal
to permit the leading Indian business house, the Tata
group, to start an international airline, especially
since Air India had belonged to Tata before it was
nationalized. As a gesture of good faith, the
then-government allowed the late Jamshetji Ratanji Tata,
the scion of the Tata house, to remain the chairman of
Air India until he was removed by the former Prime
Minister, Rajiv Gandhi. The Tata group has always
assiduously steered clear of political associations.
Many, including some senior managers, believe
that the decline of Air India started following the
removal of Tata’s management, and with the introduction
of inexperienced government bureaucrats.
The
government takeover, bureaucratic control, politics, and
total apathy, coupled with falling market share have
since stymied all efforts to revitalize the
international carrier have so far failed as the
ministers and bureaucrats refuse to allow any revival
through the inflow of private funds from India or
abroad. In the last decade Air India has neither added
new destinations to its routes, nor acquired any new
aircraft.
It is a comedown. Bobby Kooka, Air
India’s former imaginative director of marketing and
public relations, made Air India and Maharaja household
names through humorous billboards and acerbic slogans,
whether by announcing the Queen’s pregnancy on a
Piccadilly billboard or with billboards showing Maharaja
holding an umbrella to protect his passengers. The
“Maharaja” used to earn nearly half a million dollars
through sales as a decorative mascot from Copenhagen to
New York.
Trade unionism from the level of
pilots to cleaners, increasing establishment cost
without revenue generation, and a dogged opposition to
private participation to operate and sustain it with
fresh funds, sealed its fate. Its passengers today are
government bureaucrats who add a million free miles
without paying. Paying passengers are often offloaded to
accommodate staff enjoying their free travel passes. If
the Prime Minister goes on an official visit and needs
an Air India’s aircraft, flight schedules ago haywire.
India has been following an Open Sky Policy for
the last decade, allowing five private airlines to
compete for routes and passengers, but refused foreign
equity in the national carrier. The government also
refused to give up control or allow foreign equity in
its national carriers while sectors from telecom to
power and steel were privatized through its Ministry for
Disinvestment, which raised over $60 billion for the
government by selling shares in other government
controlled industries.
Earlier, an attempt to
start a private international carrier from India by the
Tata group in collaboration with the Singapore Airlines
was killed at the beginning by a flat government
refusal. As a result, India as a tourist destination has
become difficult to approach in the absence of adequate
flights. The government’s refusal to permit other
airlines to access Indian airports without reciprocal
access rights, and with Air India without the muscle to
do so, made the country a difficult tourist destination.
Even the non-resident Indians who are boosting
India’s foreign reserves have to book seats in any
airline months in advance, as flights to India are few
compared to other Asian countries. Malaysian Airlines’
requests for a frequency increase and to add new
destinations in India are on hold as India has neither
the aircraft nor muscle to match it.
Most people
of Indian origin in Malaysia have to travel to India
either by Malaysian Airlines (MAS), Thai Airways or
Singapore Airlines as Air India flies only once a week.
Flying Indian Airlines - India’s domestic
carrier which often acts as a surrogate for Air India -
from South East Asia, is costly as it takes passengers
from Malaysia only to Chennai. Anyone trying to reach
other destinations within India, such as Delhi or
Bombay, needs to pay as much as he had to pay to reach
Chennai. It is easier and cheaper fly from Kuala Lumpur,
Bangkok or Singapore to New Delhi or Mumbai by other
international carriers. The Maharajah would be twisting
his mustaches in anger.
(Copyright 2003 Asia
Times Online Co, Ltd. All rights reserved. Please
contact content@atimes.com for
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