Asian Airlines and Airports
March 20, 2011
Neelam Mathews
India’s new aviation minister is facing predictable problems as he aims to turn around troubled flag carrier Air India India’s new civil aviation minister Vayalar Ravi plans to start the turnaround plan of loss-making government-owned national carrier, Air India, by making employees a stakeholder and as an initial step, concluded extensive talks with all 14 of its labour unions.
Ravi took charge in January as the new aviation minister, three years after Air India was merged with its erstwhile domestic arm Indian Airlines in a badly managed marriage and has since been slipping into losses with human resource integration emerging as its biggest challenge.
Air India has 32,000 employees and another 10,000 on contract, the largest workforce employed by any Indian carrier, making per plane to employee ratio high and unproductive.
A veteran Congress leader Ravi, 74, who himself rose in ranks from a union leader in the southern state of Kerala, admits it’s going to be a long haul.
“I am looking at a holistic approach and not a piecemeal solution to problems,” Ravi said after meeting the carrier’s unions at Air India’s Mumbai headquarter in February. The two day talks marked by anger-venting of union leaders was only the beginning of this process. “Three main issues have emerged after the talks with employees, one is the issue of differential salaries (between employees of erstwhile Air India and Indian Airlines) and the reduction of profitable routes of the airline and also the integration of human resource within the organization is yet to take place.”
Besides the seemingly visible challenge, Air India is weathering a troubling financial crisis. It posted Rs 7,189 crore (US$ 1.6 billion) loss in 2008-09 and Rs 5,551 crore in 2009-10 and has a debt of around Rs 40,000 crore.
Signs of strain on its balance sheet have been there for everyone to see in the last three years. The airline has defaulted on payments to airport operators, moil companies and delayed staff salaries many times. Ravi says he would focus on making “it a profitable institution and restore its lost glory” and is meeting the finance minister to seek government funds for the airline besides the Rs 2000 crore already infused in 2010-11.
Air India needs more than Rs 10,000 crores to sustain and survive the current financial crisis, he predicts.
While most of its vendors have been patient with it given the airline is a sovereign entity, its strong politically
aligned unions have shown little kindness, threatening to strike many times over delayed salaries or over wage parity amongst employees within the organization. They say the merger was imposed on them and the current state of affairs was an outcome of bad policies.
Air India’s Indian Commercial Pilots Association (ICPA) threatened to go on a flash strike recently due to the
deferment of the pilots’ January salaries to Feb 14.
“On February 1, we were told salaries would be paid on February 7. A few days later, the deadline was the 10th and then we were told it would be only February 14,” said Capt Rishab Kapur of the ICPA. “The pilots and 31,000 employees of Air India are frustrated. It’s only because of the management’s decisions that we are in such a mess.”
An imminent strike forced Air India to release salaries on Feb 14. There is not enough backing for the Air India management to prevail if as a consequence of cuts in the annual wage bill.
Air India has already been asked by Ravi to present a detailed report on the hires made by the airline last year
from the private sector at steep salaries when it has no money to pay to its existing employees. Pawan Arora, the chief operating officer of its low cost international subsidiary Air India Express, was swiftly sacked days after the minister seeking a report on him. Arora, was one of the four hires besides Air India COO Gustav Baldauf, chief training officer Stefan Sukumar and Kamaljeet Ratan as the head of corporate communications picked up to turn around the airline.
The government has set tough steps to win equity support. This includes severe cost-cutting and a increase in revenues. Consulting firm Deloitte Consulting India and SBI Capital Markets are finalizing a debt restructuring and turnaround plan for the airline. One of the strategies being discussed under this plan is to double Air India’s fleet size from 135 to 272 planes over five years.
“Based on the studies our consultants have done, the Indian aviation market will grow to 150 million passengers by 2015 from the current 72 million, and a company has to expand in a growing market,” Gustav Baldauf, Air India’s first chief operating officer recently told a newswire.
Under such a plan at least 107 planes maybe leased by the end of 2015. The carrier also plans to shift about 17,000 of its employees to separate business units for ground handling, maintenance and for plane repair to help cut costs. “Shifting people will decrease the main company’s salary bill by that much since these units are independent entities and don’t count in Air India’s wage bill,” Baldauf added.
Despite the challenges, there is a lot going for the airline if it is able to manage this difficult period, analysts say.
From March, passengers on Air India will no longer have to travel on separate tickets for domestic and international flights, following the successful trials of the new single ticket reservation system, with its code merging into one – AI. The passenger reservation system or PSS is being implemented by SITA, will also help automate baggage reconciliation; enabling kiosk check-in across the network; and also mobile check-ins.
“Once the single code becomes fully operational, Air India passengers would no longer have separate codes
for domestic and international travel. Passengers from Aizwal to Toronto via any other destination/s would have a single ticket and therefore seamless travel,” Air India says.
The airline is expected to enter Star Alliance this year, the world’s largest integrated air transport network, with 26 carriers as members that operate around 19,500 flights every day from as many as 1,071 airports in 171 countries.
The AI single code functioning is a key condition to join Star Alliance, in which member-airlines share each others code, allowing passengers to travel with multiple airlines on the same ticket.
“This would ensure a number of additional facilities which would make the passengers’ journey enjoyable and
hassle-free,” says Arvind Jadhav, Air India’s chairman & managing director.
By end of the year, the carrier hopes to receive the much delayed Boeing Dreamliner 787. Boeing says it will deliver the first of the 27 Dreamliner aircraft ordered by Air India in the October-December quarter. Air India had ordered the 787 as part of a US$15 billion 111-aircraft order to Boeing and its rival Airbus in 2005 and this is likely to help the carrier save costs and expand its international footprint.
Air India has a network covering 33 destinations across the US, Europe, Canada, the Far-East and South-East Asia, and the Gulf. Its domestic network covers 64 destinations and its fleet of 135 aircraft comprises brand new wide-body Boeing 777 and the narrow body Airbus A320s, 737s. Yet its domestic market share has slipped to 17.1%, behind private carriers like Jet Airways’ 26.2%, Kingfisher’s 19.1% and IndiGo’s 17.3%. It has already swapped its European hub of Frankfurt last year with New Delhi’s new Terminal 3 which is it says will help increase revenue and loads over the next fiscal.
March 20, 2011
Neelam Mathews
India’s new aviation minister is facing predictable problems as he aims to turn around troubled flag carrier Air India India’s new civil aviation minister Vayalar Ravi plans to start the turnaround plan of loss-making government-owned national carrier, Air India, by making employees a stakeholder and as an initial step, concluded extensive talks with all 14 of its labour unions.
Ravi took charge in January as the new aviation minister, three years after Air India was merged with its erstwhile domestic arm Indian Airlines in a badly managed marriage and has since been slipping into losses with human resource integration emerging as its biggest challenge.
Air India has 32,000 employees and another 10,000 on contract, the largest workforce employed by any Indian carrier, making per plane to employee ratio high and unproductive.
A veteran Congress leader Ravi, 74, who himself rose in ranks from a union leader in the southern state of Kerala, admits it’s going to be a long haul.
“I am looking at a holistic approach and not a piecemeal solution to problems,” Ravi said after meeting the carrier’s unions at Air India’s Mumbai headquarter in February. The two day talks marked by anger-venting of union leaders was only the beginning of this process. “Three main issues have emerged after the talks with employees, one is the issue of differential salaries (between employees of erstwhile Air India and Indian Airlines) and the reduction of profitable routes of the airline and also the integration of human resource within the organization is yet to take place.”
Besides the seemingly visible challenge, Air India is weathering a troubling financial crisis. It posted Rs 7,189 crore (US$ 1.6 billion) loss in 2008-09 and Rs 5,551 crore in 2009-10 and has a debt of around Rs 40,000 crore.
Signs of strain on its balance sheet have been there for everyone to see in the last three years. The airline has defaulted on payments to airport operators, moil companies and delayed staff salaries many times. Ravi says he would focus on making “it a profitable institution and restore its lost glory” and is meeting the finance minister to seek government funds for the airline besides the Rs 2000 crore already infused in 2010-11.
Air India needs more than Rs 10,000 crores to sustain and survive the current financial crisis, he predicts.
While most of its vendors have been patient with it given the airline is a sovereign entity, its strong politically
aligned unions have shown little kindness, threatening to strike many times over delayed salaries or over wage parity amongst employees within the organization. They say the merger was imposed on them and the current state of affairs was an outcome of bad policies.
Air India’s Indian Commercial Pilots Association (ICPA) threatened to go on a flash strike recently due to the
deferment of the pilots’ January salaries to Feb 14.
“On February 1, we were told salaries would be paid on February 7. A few days later, the deadline was the 10th and then we were told it would be only February 14,” said Capt Rishab Kapur of the ICPA. “The pilots and 31,000 employees of Air India are frustrated. It’s only because of the management’s decisions that we are in such a mess.”
An imminent strike forced Air India to release salaries on Feb 14. There is not enough backing for the Air India management to prevail if as a consequence of cuts in the annual wage bill.
Air India has already been asked by Ravi to present a detailed report on the hires made by the airline last year
from the private sector at steep salaries when it has no money to pay to its existing employees. Pawan Arora, the chief operating officer of its low cost international subsidiary Air India Express, was swiftly sacked days after the minister seeking a report on him. Arora, was one of the four hires besides Air India COO Gustav Baldauf, chief training officer Stefan Sukumar and Kamaljeet Ratan as the head of corporate communications picked up to turn around the airline.
The government has set tough steps to win equity support. This includes severe cost-cutting and a increase in revenues. Consulting firm Deloitte Consulting India and SBI Capital Markets are finalizing a debt restructuring and turnaround plan for the airline. One of the strategies being discussed under this plan is to double Air India’s fleet size from 135 to 272 planes over five years.
“Based on the studies our consultants have done, the Indian aviation market will grow to 150 million passengers by 2015 from the current 72 million, and a company has to expand in a growing market,” Gustav Baldauf, Air India’s first chief operating officer recently told a newswire.
Under such a plan at least 107 planes maybe leased by the end of 2015. The carrier also plans to shift about 17,000 of its employees to separate business units for ground handling, maintenance and for plane repair to help cut costs. “Shifting people will decrease the main company’s salary bill by that much since these units are independent entities and don’t count in Air India’s wage bill,” Baldauf added.
Despite the challenges, there is a lot going for the airline if it is able to manage this difficult period, analysts say.
From March, passengers on Air India will no longer have to travel on separate tickets for domestic and international flights, following the successful trials of the new single ticket reservation system, with its code merging into one – AI. The passenger reservation system or PSS is being implemented by SITA, will also help automate baggage reconciliation; enabling kiosk check-in across the network; and also mobile check-ins.
“Once the single code becomes fully operational, Air India passengers would no longer have separate codes
for domestic and international travel. Passengers from Aizwal to Toronto via any other destination/s would have a single ticket and therefore seamless travel,” Air India says.
The airline is expected to enter Star Alliance this year, the world’s largest integrated air transport network, with 26 carriers as members that operate around 19,500 flights every day from as many as 1,071 airports in 171 countries.
The AI single code functioning is a key condition to join Star Alliance, in which member-airlines share each others code, allowing passengers to travel with multiple airlines on the same ticket.
“This would ensure a number of additional facilities which would make the passengers’ journey enjoyable and
hassle-free,” says Arvind Jadhav, Air India’s chairman & managing director.
By end of the year, the carrier hopes to receive the much delayed Boeing Dreamliner 787. Boeing says it will deliver the first of the 27 Dreamliner aircraft ordered by Air India in the October-December quarter. Air India had ordered the 787 as part of a US$15 billion 111-aircraft order to Boeing and its rival Airbus in 2005 and this is likely to help the carrier save costs and expand its international footprint.
Air India has a network covering 33 destinations across the US, Europe, Canada, the Far-East and South-East Asia, and the Gulf. Its domestic network covers 64 destinations and its fleet of 135 aircraft comprises brand new wide-body Boeing 777 and the narrow body Airbus A320s, 737s. Yet its domestic market share has slipped to 17.1%, behind private carriers like Jet Airways’ 26.2%, Kingfisher’s 19.1% and IndiGo’s 17.3%. It has already swapped its European hub of Frankfurt last year with New Delhi’s new Terminal 3 which is it says will help increase revenue and loads over the next fiscal.
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