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Mainstream, Vol. XLVII, No 34, August 8, 2009

How we Smashed a Jewel

Sunday 16 August 2009, by T J S George

What a pathetic plight Air-India has reached. It’s become the first government-owned company that is unable to pay salaries. The unions blame the government and insist on their privileges. Which means the irresistible force of business economics is in head-on collision with the immovable object of employee resistance. Disaster beckons.

Public sympathy is unlikely to be with Air-India. For one thing, it has been unpopular with passengers for many years. The reasons range from unreliable timings to on-board discrimination against Indians. In the Gulf sector, where it maintained a lucrative monopoly for as long as it could, its ill-treatment of passengers on delayed flights had become a scandal.

For another, the villains in the Air-India tragedy are the bureaucrats and the unions—a combination that has been the undoing of many public sector undertakings. Because of the glamour and perks associated with the airline business, Air-India became a magnet for the IAS top brass. Those who were good at lubricating politicians— a tribe that loves lubrication—managed to appropriate the company for themselves. Thus non-specialists took charge of a highly specialised enterprise. The unions, as usual, put rights before responsibility.

True to public sector morality, Air-India today has the world’s highest staff strength for an airline: 31,000. Their salary bill is Rs 350 crores a month. The norm in the airline business is to have 75-80 employees per aircraft. Air-India has about 230 per aircraft. It is currently running at a loss of Rs 15 crores a day.

THOSE who have brought the company to such a pass deserve punishment, not a bail-out package. They had inherited a jewel of a company before they ruined it. Tata Airlines, established one year before independence, had become, one year after independence, Air-India International. In 1953 it was nationalised but, on the invitation of Jawaharlal Nehru, J.R.D. Tata continued as Chairman. In 1978 Tata was summarily dismissed by Prime Minister Morarji Desai. After that there was no stopping the IAS-politician nexus.

Under J.R.D. Tata’s leadership, Air-India had become one of the world’s great airlines, admired for on-time performance, excellence of service, cleanliness and good food, not to mention the “exotic hostesses” at a time when the saree was not all that familiar in foreign cities. All this became possible because J.R.D. was an aviator himself and he put together a team of internationally respected professionals. As author Anthony Samson noticed in his book Empires of the Skies, J.R.D insulated his airline from favouritism in appointments—the exact opposite of our bureaucratic culture.

That contrast is also the clearest pointer to what needs to be done. Politicians and babus must stop pretending that they are Vijay Mallyas and Naresh Goyals. Business is not their business. They should do what Margaret Thatcher did to British Airways. When she became Prime Minister in 1979, she announced she would return BA to profit-making. It was an elaborate process. By 1987 it was completed and British Airways became a private company. Of course it has been caught in the present business downturn, but that is a factor of business, not of mismanagement by babus and exploitation by unions.

Thatcher took one procedural move, which too is worth emulating. She appointed Lord King, her “favourite businessman”, to work out the modalities of privatisation. Perhaps Manmohan Singh can entrust the task to the Coimbatore Paramount Airways owner for a compelling reason: He has worked out the only business model that seems to be bucking the economic downturn syndrome. Besides, M. Thiagarajan is a pilot, like J.R.D. Tata.

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