India’s Maharajah needs new clothes

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For an airline known as the “Maharajah”, or emperor, of the skies, it has been quite a come down for Air India in recent weeks.

We knew that things were not going well at the state-owned carrier, which in reality has been a mess for several years. But the first sign of how bad things were came when Raghu Menon was eased out as chairman and managing director in April after only a year.

The full extent of the troubles has been revealed, with the government likely to cough up the $800 million that is needed to keep Air India afloat. It has attached strings to the bail-out and Arvind Jadhav, who replaced Menon, has the unenviable task of embarking on a massive restructuring of Air India.

Air India’s management need to employ all of their skills – and have massive doses of luck – to achieve New Delhi aim of becoming profitable within two years. The airline is now only the third largest in India measured by its share of domestic traffic, and it has the lowest load factors in the country. Translation: passengers shun it and it has highly inefficient operations.

Some say that New Delhi will not allow the airline to fold, and that may be true. But there is an added impetus to reform the airline – the government does not want to erode its fresh electoral mandate and the goodwill it has through a massive but unsuccessful infusion of public funds into an ailing and ineffective carrier. In India, where politics permeates everything, Air India could become a tinderbox.

The Maharajah needs new clothes and they are going to be very expensive ones.

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6 Responses to India’s Maharajah needs new clothes

  1. Santhosh Kumar 27 June, 2009 at 3:44 pm #

    I have few suggestions for regaining Air India’s (AI) past glory:-
    (1) Give back AI to its creators TATAs for Re. 1
    (2) Give US$ 2m per annum as bonus for next 5 years to TATAs for taking over this “liability” and tax payer can save US$ 790m. Give TATAs a tax break for 5 years as an incentive too.
    (3) Give a free hand to TATAs to hire, fire and motivate staff.
    (4) Those who want to go on strike (obviously those inefficient lot who don’t want to work only go for stike in this case) for this “henious” act be given the option of early retirement with 50% of salary paid by Govt. or to migrate to any other non-aviation vacanies available within Govt. of India.

    If we do this we could once again see the Maharaja in its past glory.

    Sathosh

  2. Siva Govindasamy 29 June, 2009 at 10:27 am #

    Ah, but would Tata want it back? Privatisation may be key, but unwinding the labour agreements that have been set in place for years may be a nightmare. And I don’t think the staff should be fully blamed – I mean, it will be crazy to expect them to simply accept massive changes to their contracts.

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