Maharaja of the skies in doldrums

As the government keeps pumping huge amounts of money into the loss-making public sector airline, which tellingly has the Maharaja icon as its mascot, the employees strike work at will demanding better wages.

The latest in the series of industrial disputes to hit the firm is the agitation by the pilots (called off on Friday) – with others not far behind as cabin crew too have threatened a stir – making the airline bleed endlessly.

The strike by nearly half of the pilots operating on domestic routes of the carrier, who earlier belonged to the Indian Airline (now merged into Air India) demanding pay parity with counterparts who were already with Air India and flying on international routes), is the culmination of gross neglect, mismanagement, inefficiency and all other trappings of a badly-run company. More on that later.

What are the pilots’ demands and how justified are they? The formerly IA pilots and also members of the Indian Commercial Pilots Association (ICPA]), which called the strike, say there are differences in salaries and working conditions between them and their counterparts of AI.

They say that the management has violated the memorandum of settlement signed in November 2009 on implementing the Sixth Pay Commission recommendations. The ICPA, which has 800 pilots as members, claims that AI pilots enjoy a big fixed salary component while the former IA pilots are paid by the hour. Civil aviation minister Vayalar Ravi, however, counters this claim saying former IA pilots get more than Rs 2 lakh in salary and have no reason to go on strike. The management was prepared to resolve issues through talks.

The ICPA insists that the management must grant 75 hours fixed flying allowance in a month and layover subsistence allowance of $1,600 for the commander and $1,300 for the co-pilot. The management says it has set up a committee headed by Justice Dharmadhikari, a retired Supreme Court judge, to look into all the human resources integration issues — including pay parity, working conditions, seniority etc.

As regards granting fixed hours of flying allowance, AI sources say it is impractical as AI pilots fly long hours on international routes while ICPA members fly domestic routes for shorter hours. Also, the hours of usage of aircraft is far less on domestic routes compared to those flying overseas routes.

The management is firm that it would be difficult to meet the demands given the present parlous state of finances of the crisis-ridden airline. Asked to comment on the strike, aviation expert Rohit Bansal, CEO, Hammurabi & Solomon Consulting, told Deccan Herald: “The pilots have seldom bothered about what's justified and what is not. They’ve flexed their muscle from time to time, seldom mindful of rationale, morality or even their employer’s capacity to pay”.

While the agitating pilots say their demands go back to 2007-08 when IA was merged into AI, the management has to be blamed for dragging its feet for so long. The striking pilots have not found a sympathetic Delhi High Court either, as it asked them to withdraw the stir and when they ignored the direction, initiated contempt proceedings against nine ICPA office bearers.

Haphazard merger

The root cause of the problem, perhaps, lies in the merger. Except the name, nothing else reflects the merger of the two entities. The merger of strategic business units such as cargo services, ground handling facilities, maintenance, repair and overhaul (MRO) facilities etc, are still a far cry. Says Bansal: “Pussyfooting by successive regimes on the unfinished task of AI merger with IA, where the easier part of integration, ie, a common board, was achieved, but the contentious and more important part of assimilating pilots, flight engineers, technicians, and several other cadres, not to mention stores and aircraft types, was left untouched.”

As a result of these ills, the losses of AI is mounting: It suffered a loss of Rs 2,226 crore in 2007-08, Rs 5,548 crore in 2008-09, Rs 5,551 crore in 2009-10 and Rs 1,791 crore in the first quarter of 2010-11. Its accumulated losses are of the order of Rs 13,000 crore as on March 31, 2010. As per figures given to Parliament, AI, whose daily cash inflow is Rs 36 crore, has an outgo of Rs 57 cr, resulting in daily losses of Rs 21 crore! (add to this ticketing revenue loss of at least Rs 150 crore during the strike). The last time it posted profit was in 2005-06: Rs 12 crore for AI and Rs 63 crore for IA. At present, the AI’s annual salary bill is a whopping Rs 3,000 crore for its massive workforce of 40,000.

To ensure that AI survives, the government is pumping in cash: it has infused Rs 2,000 crore in AI as equity and will provide another Rs 1,200 crore this fiscal. According to one estimate, AI requires Rs 17,500 crore to come out of the mess. As Chennai-based aviation expert Capt Mohan Ranganathan, also a government panel member on safety, remarks: "Other airlines need 'load factor' (filling up of seats) to survive. AI has the 'dole factor' to survive."

Privatisation moves

AI now has – thanks to the merger of IA – a fleet size of 165 aircraft (of two aircraft types - Boeing and Airbus) with a huge employee-aircraft ratio of 243:1. The ills plaguing the carrier have ensured that its market share dropped from 50 per cent a decade ago to just 15.8 per cent now (in the domestic sector ).

The decision to purchase 111 aircraft at Rs 50,000 crore will result in a huge interest outgo of Rs 3,300 crore a year. In addition, the decision to allow foreign airlines extensive flying rights to fly to India, withdrawal of flights from profitable routes, allegedly to benefit private airlines and extremely low aircraft utilisation of about nine hours a day are cited as some of the reasons for the current crisis afflicting the airline. Thus, it is no surprise that the cries for privatisation of AI is reaching a crescendo.

Maharaja of the skies in doldrums

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