Divestment is the only option for Air India: Lohani

The country’s only public sector commercial airline, Air India, has been suffering from a heavy financial burden. The airliner saw its divestment programme, in which the government was expected to retain a part stake, fail last year. However, the company is all set to witness a second attempt at divestment.

The company’s Chairman and Managing Director Ashwani Lohani explains to Furquan Moharkan of DH how the debt (Rs 58, 352 crore) has become a monster for the public sector aviation behemoth. Edited excerpts:

Your specialisation has been turning around loss-making companies. When do you think, you can turn around AI?

Considering the severe financial constraints that we have been facing, I am satisfied. We are, however, looking at disinvestment. So the focus at present is running the organisation well and enhancing its value by increasing the flying hours of the aircraft. We are introducing many new flights – both domestic and international – but with the same fleet. This would increase our revenue from the existing inventory.

You talked about financial constraints. Is it debt?

Our problem is the huge debt. Minus the debt, the airline can be turned around, provided the working is not hampered by the inherent constraints of the government way of working. Yes, the massive debt is a major problem. The only way to reduce debt is to earn more operating profits than the debt servicing amount.

Your cash flow is critical. Does that bother you?

Yes, cash flow is an issue for us. It is so because of the huge gap between the total income and the total cost of the company.

Air India lost Rs 15 crore on an average each day. With thin margins, how long do you think it is sustainable?

Unless we get equity support, the business is just not sustainable. And in this scenario, disinvestment is the only option, provided it succeeds. We also need to appreciate that running a highly complex business like an airline efficiently within the confines of the complex government rules and limitations, is almost impossible.

And what about losses?

While the airline continues to perform well and is poised to make operating profits this year, the net losses are on account of the debt servicing charges. The depicted loss figure does not reflect the true state of the airline.

Air India has issues with on-time performance. Why and what is the road ahead?

It is a symptom and not the disease. If I don’t have money to pay, how can I operate efficiently? Till recently, we had 20 grounded planes because of a shortage of funds. Everything is linked to the huge deficit of money.

Corruption is a major issue in PSUs…

Let me say that corruption is not a major issue in Air India. Moreover, we have a very proactive approach to this issue. Malafide is not tolerated and the subject of corruption is also brought on the table at every possible opportunity. Ultimately corruption is linked to the complexity of processes and process reforms need to be carried out.

Given what is happening, what about employee motivation?

I would not say that they are in a high state of motivation, but they aren’t demotivated either. Our plans at expansion and growth also tend to infuse energy in the organisation. I also maintain a very open style of management wherein there is ground connect of the management with the field level staff.

And ownership model? Hasn’t it been impacting your finances?

Last year, we added Airbus A321 aircraft on a lease basis. So we are moving more and more towards the leasing model of business.

Impact of Jet grounding?

We saw a marginal increase in our passenger loads. However, that withered away as private airlines added capacity, some of it by taking on lease the Jet’s grounded planes. We, because of our complex way of working, could not add capacity.