July 25, 2012
IATA DG and CEO Tony Tyler - on a rushed visit to India- made it clear the world beyond the sub-continent sees Indian aviation in crisis. Airline losses were around $2 billion in the year ended March 2012, following a loss of $3.5 billion over the previous three years.
“(As far as Air India goes), a long-term state-aid has not rehabilitated the business and in the meantime it is having a destructive impact on the market. Governments must lay the foundations for fair competition and regulate safety, security and sustainability,” said Tyler. He suggested the carrier could follow the example of the restructuring of Japan Airlines (JAL), which made a profit last year.
The JAL case has some parallels with Air India. Both merged with a primarily domestic partner - JAL with Japan Air System in 2002 and Air India with Indian Airlines starting in 2007. The 2008 fuel price spike, global financial crisis and subsequent recession hit both carriers very hard. JAL filed for bankruptcy in January 2010 and the Japanese government led a restructuring effort with an investment of over $3 billion.
“There were many skeptics who thought that the constraints of Japan’s consensus-based culture would make it impossible for management to take the difficult decisions required to turn the carrier around. But they were proved wrong. The cuts were deep - some 50 routes and 16,000 jobs. That’s just short of a third of the workforce. With this bitter medicine, and other measures, JAL emerged from bankruptcy. After reporting a $2.5 billion profit in 2011 it plans to re-list its shares this autumn. There was controversy. A debate continues inside Japan over whether government intervention tilted the playing field against rival airlines. But I raise the JAL example to demonstrate what can be achieved in a short period of time if the parties are committed to a plan with clear targets guided by solid business principles.”
Tyler was perhaps looking at an ideal world which doesn’t exist in India scarred by political intervention and lack of national interest.
“I don’t profess to have a comprehensive solution. But as a believer in India’s great potential, I urge all parties to take inspiration from the JAL example. Urgent and coordinated actions are needed to resolve Air India’s problems and return the market to normal commercial principles as quickly as possible.
“Government aid must not be a blank check. Clear accountabilities and timelines for management, employees (including the pilots) and everybody involved have to be set. And transparent disclosure is needed to measure progress. Without this, the attempts to rescue the national carrier could well send the whole sector into intensive care.”
Is anybody listening or doesn’t anybody care anymore?