Ashwini Phadnis
Air India tried to get into the world's biggest interlining group, Star Alliance. ‘You aren't good enough', it was told.
August has been an unfortunate month for Air India. Early in the month, it lost out on an opportunity of being the first Indian carrier to join a global airline alliance. Mid-month saw a change of guard at the top. Heaven knows what will happen by the end.
Air India tried to get into the world's biggest interlining group, Star Alliance. ‘You aren't good enough', it was told.
On August 12, the Government appointed Mr Rohit Nandan, a Joint Secretary in the Ministry of Civil Aviation as the new Chairman and Managing Director of Air India (AI), thereby bringing down the curtain on the tumultuous innings of Mr Arvind Jadhav.
It is also believed that the airline will get new independent directors on its Board. The persons to be inducted are likely to be from the finance and hospitality sectors.
JADHAV'S NOSEDIVE
During Mr Jadhav's over two-year-long stint as CMD, the airline's domestic market share plunged to the fifth position from the third. Its employees expressed their disgruntlement on more than one occasion by going on strike. This not only inconvenienced flyers but also led to a severe dent in the Maharaja's image.
Worse, the airline's total accumulated losses on March 31, 2010 stood at Rs 13,326.86 crore with the loss before tax during 2010-11 expected to be Rs 6,994 crore (provisional).
The financial health of the airline is precarious with current monthly revenue collections being around Rs 1,100 crore, while the expenditure is about Rs 1,700 crore, thereby leaving a gap of Rs 600 crore a month.
NOT NOW, DARLING
Given this dismal performance, an entry into the largest global airline alliance, the Star Alliance, would have been useful. But this was not to be. Others have standards, even if Air India doesn't.
The reasons for AI losing out on being a part of Star Alliance include the airline not meeting the minimum joining conditions that were contractually agreed upon in December 2007.
Though the details of what AI had not achieved were not made public, this latest setback is certainly a blow for the cash-strapped Maharaja.
By joining the Alliance, Air India would have gained an estimated annual 5 per cent increase in domestic and international passengers.
The completion of the merger process between Air India and Indian Airlines would have meant another 5 per cent increase in the number of passengers carried.
All these would have translated into a huge quantum of revenue for the airline.
And what better opportunity could there have been for AI to earn revenues when it has just got Rs 1,200 crore from the government, and is asking for more, to just keep itself afloat?
Being part of the Star Alliance would have been a win-win situation for the Maharaja in other ways as well.
Worldwide, Star Alliance is the oldest and largest alliance in terms of the number of airlines that it has as its members.
Its member airlines include the German carrier Lufthansa, Singapore Airlines, United Airlines, Air China and Japan's All Nippon Airways (ANA). Overall, the Star Alliance network offers more than 21,200 daily flights to 1,185 airports in 185 countries.
Being a part of the Alliance would have meant that AI got the opportunity to widen its footprint.
The most significant factor in AI losing out on the membership has to do with the way the Maharaja functions.
An opinion which is gaining currency is that member airlines were against AI because it never took the process of joining the Alliance seriously.
Every airline seeking membership of the club is given a deadline for completing the minimum joining requirements. AI's lack of seriousness was manifest at this stage.
PASSENGER SERVICE SYSTEM
It took way too long to get a Passenger Service System. This was considered crucial for the merger of AI and Indian Airlines and, hence, for the airline to finally join the Alliance.
A combination of other such factors meant that the background work for joining the Alliance, which was originally meant to have been completed in nine months, took close to three years.
Given this scenario, the airline's future seems bleak. The merger process is in doldrums; it has a fairly new minister who took over six months ago and now the airline has a new chairman and managing director with a new team of independent directors going to be put in place soon.
Needless to say, this new team will take time to settle down.
Further, AI has also bid adieu to Star Alliance, thereby losing out on a chance to make some money.
(This article was published on August 16, 2011) Source : Business Line . Thank You.
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