The drawn-out strike by Air India pilots over who gets to fly the airline's new Boeing Dreamliners is a stark reminder that there is something very wrong with the Maharaja. The pilots are returning to work after two months on pain of being fired and the prospect of losing taxpayer money that could turn the bleeding airline around. Air India's owner, the government, has sacked 101 of the 450 pilots who went on strike and has threatened to hold back bailout funding unless the airline learns to manage its marriage to Indian Airlines better. The courts have had to broker peace; the Indian Pilots' Guild withdrew its strike on Tuesday on condition that the Air India management will look "sympathetically" at reinstating the sacked pilots.
The fact that Air India has had to go in for a second restructuring barely a couple of years after it merged with Indian Airlines raises a few uncomfortable questions. The logic of that merger has not been completely upended by the external environment. The economies of scale that were to accrue, a consolidated domestic and international reach and an upgraded fleet are part of any airline's medium-term goals. What went wrong is a mishandling of the merger process. Two flabby organisations have not blended into a leaner structure, capacities have expanded despite a slump in the industry, fleets by competing aircraft manufactures do not permit operational synergies while parity between employees of the legacy airlines is elusive, and the company continues to be headed by bureaucrats with little experience of aviation. Central to any revival strategy for Air India is shedding flab in an airline that has half again as many employees per aircraft as the global average.
The government has promised to pump Rs. 30,000 crore of equity into Air India over the next eight years on condition that the airline begins a long and painful journey to profitability. The riders are that two-thirds of the bloated airline's 30,000 workers will be parked in ground handling and maintenance subsidiaries, its fleet will fly only one empty seat in every four and reach destinations on time nine times out of 10. The bigger fleet - the government has cleared the purchase of 27 Boeing Dreamliners - and extra cash have been justified on the premise that Air India can earn Rs. 5,000 crore more and run on Rs. 4,000 crore less every year. To do this, the airline must cart 17 million people in 2015. If it manages to accomplish this, it could fly out of the red as early as five years from now. First, however, Air India must learn to avoid the minefield of industrial dispute such radical restructuring entails.
04 July 2012