The Descent of Air India (13 page)

2.  Simultaneously, the process of inducting a strategic partner was to be initiated, on the basis of global competitive bids, through an issue of fresh equity shares of the face value of
770 crore. This would enhance the airline’s paid-up equity capital to
1,924 crore and reduce the government’s holding to 60 per cent. The strategic partner should be a consortium of airlines and investors, with at least 25 per cent of the equity brought in by the consortium being held by Indian investors. The selection of the strategic partner should be through global competitive bidding among pre-qualified bidders. The pre-qualification of bidders should be based on their financial, technical, marketing and managerial capabilities and commitment to Air-India’s fleet expansion. A shareholder agreement providing for an appropriate share in the management to the strategic partner would also be necessary.

3.  The government should thereafter divest 20 per cent of the total paid-up equity capital by offering 10 per cent to domestic institutional investors at the price paid by the highest bidder for Air-India shares and the remaining 10 per cent to retail investors and employees at a discount. Any shares not taken up by retail investors and employees may be offered to domestic institutional investors. This would eventually bring the government shareholding in Air-India down to 40 per cent. Following the implementation of these steps, the government and the strategic partner would each hold 40 per cent of the equity capital of Air-India and the remaining would be dispersed among the domestic institutional investors, employees and the public.

The Disinvestment Commission suggested appointing global advisors to help conduct the strategic sale and the offer of sale. It also recommended the following measures:

‘1.  The maintenance, engineering and ground support operations of Air-India, which are its inherent strengths, could be hived off as separate companies. In line with the current global trend, this would enable the airline to benefit from outsourcing these services and reduce its overheads.

2.  Currently, Air-India connects major international destinations with all major international airports in India. A well-knit and effective hub-and-spoke arrangement with Indian Airlines would enable Air-India to provide direct and convenient connectivity with all Indian airports to its customers. For this purpose, there should be a clear demarcation of roles that these two airlines have to play in providing better customer service and jointly competing with other international airlines.

3.  A voluntary retirement scheme should be immediately introduced to reduce manpower.

4.  And finally, since the airline is a highly service-oriented industry, Air-India should initiate steps to improve the quality of its service to enhance its market share.’

Though the recommendations were meaningful and timely, they were not followed up. The irony: what was recommended in 1998 is the course being considered even today for Air India’s revival, except the key issue of equity disinvestment, which the government while allowing FDI by foreign airlines in private airlines has specifically barred the same in the case of Air India.

Interestingly when the government was considering offloading 40 per cent equity stake in the airline, one of the key companies that had evinced interest was the Tata group, the original owner of Air India in alliance with Singapore Airlines (SIA) as their foreign joint venture partner. Ratan Tata, the then group chairman had in fact gone on record to say that the group had an emotional attachment to Air India, as the national carrier was founded by the late J. R. D. Tata.

Many of us who knew that not only disinvestment but allowing a professional group to manage the airline was imperative for Air India’s survival supported the move. However, there were others who felt that their careers would be threatened if the government lost control over the airline and engaged in political manoeuvring to oppose the move.

By the time the due-diligence exercise, which was a precursor to the sale of equity stake was completed in April 2001 by the potential bidders, the environment in Air India had become vitiated. Those opposed to the disinvestment found supporters in the ministry. There were rumours too that a private sector airline owner who saw a threat to his airline from a strong Air India had thrown his weight behind those opposing the disinvestment. Soon, as was to be expected, the Tata-Singapore Airlines bid was withdrawn and Air India was left in the lurch.

An unfortunate fallout of the management infighting was that M. P. Mascarenhas who had supported disinvestment and opposed doling out of bilateral rights to foreign airlines had to face the ignominy of being suspended on trumped up charges on 22 May 2001. If proof was indeed needed of complicity of some Air India personnel and ministry bigwigs in his suspension, it came soon thereafter. When a group of employees decided to wear black bands to protest at the suspension of Mr Mascarenhas, the Secretary, Civil Aviation, Mr Jung, gave written directions to the then Air India managing director, J. N. Gogoi that ‘wide publicity should be given to rejoicing in AI on hearing the news of the suspension’. As one who had always maintained a distinction in loyalty towards Air India and the chairman or managing director, I refused to publicise Mr Mascarenhas’ suspension. In an unprecedented move, the ministry then began to use the Press Information Bureau for issuing press releases on behalf of Air India. Mr Mascarenhas was reinstated a couple of days before his superannuation on 30 November 2001 after being exonerated of all charges. But the damage had already been done.

DIFFERENT MEN, DIFFERENT STYLES

In 2003, the airline was led by two very different individuals. They were poles apart but delivered on their promises. Most importantly, they had a plan for Air India and were committed to its fruition. One was J. N. Gogoi, an engineer who had worked with Air India his entire life but who was known more for his implementation and execution rather than managerial skills; and the other was Sunil Arora, an IAS officer who had turned Indian Airlines around in his three years as chairman. Mr Arora was appointed as the managing director on 1 August 2003 after Mr Gogoi retired. K. Roy Paul, as secretary of the Ministry of Civil Aviation, held concurrent charge as the chairman of Air India during that period.

Mr Gogoi knew the airline, and having risen through its ranks, had a first-hand experience of the problems that it faced. He was also aware of the damage that had been done by a few past chairmen and managing directors who had run the corporation like their own fiefdoms with no concern for the consequences of their actions. Several chairmen/managing directors had functioned as one-point power centres, rarely allowing their colleagues a say in the running of the airline. This had been detrimental for the airline and Mr Gogoi, perhaps keen to bring about an improvement in its performance or compelled by the nature of his character, ensured a refreshing transparency in decision making.

I remember being part of several meetings during this time where decisions were taken by consensus—a sharp departure from such gatherings in the past where the diktat of the chairman or managing director was treated as gospel. Mr Gogoi did not hesitate to seek the opinions of others. He had no compunctions about admitting failure or even his lack of knowledge on certain issues. He was willing to hear us out and, at the same time, was comfortable being led by K. Roy Paul on major decisions.

Mr Gogoi demonstrated his mettle during the Indian Pilots’ Guild (IPG)–led agitation during April–May 2003 over the issue of flying to countries affected by Severe Acute Respiratory Syndrome (SARS). The union was used to pliant chairmen who would give in to their demands at the mere mention of an agitation. But Mr Gogoi, unlike most of his predecessors, did not buckle under pressure. He set up a core team to tackle the protests and ensuing negotiations and at meetings, after ascertaining the views of each member, respected them and acted upon them. Such an attitude was not only novel but also motivated all of us in the senior management to give our best. He made it easy for people to voice their opinion.

Mr Gogoi’s genial approach was different from the no-nonsense temperament of his successor, Sunil Arora. Mr Arora was intolerant of flatterers and was blunt and direct with his team. He was a man in a hurry. He focused on the airline’s problems and worked towards its interests. He encouraged initiative and was open to suggestions, but he abhorred being drawn into irrelevant issues. During his tenure, the organisational emphasis was on revenue generation and cost control.

Mr Gogoi and Mr Arora took several decisions that could have been game changers if only they had been followed through to their logical ends. Under their regime, for the first time in several years, there was an attempt to instil greater discipline into the unions. The management was not afraid to propose and push through changes, and the airline’s work ethic improved. In addition, several revenue-enhancing schemes were introduced and the expenditure bill was reduced. The two also consulted the rest of the senior management team for major strategy decisions. Finally, it seemed as if Air India was ready to scrape off the thick crust of indifference and stupor that had become its second skin.

DEALING WITH THE UNIONS FIRMLY AND ABLY

In April 2003, the IPG issued a directive asking pilots to stop operating flights to all SARS-affected Asian countries. Pilots were also asked not to fly to any destination if there was even a single passenger or cabin crew member on board who had travelled to SARS-affected countries in the previous 10 days. Thus, if Air India flights to non–SARS-affected countries happened to have a passenger or crew member who had flown to Hong Kong or Bangkok or Singapore or any other epidemic-hit country, the planes would be grounded. This was unreasonable. No other country—not even those that had been affected by SARS—had such stringent conditions imposed by its pilots. And Air India had taken the necessary steps to ensure that the aircraft were sanitised and SARS-free. Not only was the IPG imposing impossible conditions on the airline, it was actually crippling its business.

Mr Gogoi had spent a lifetime working in Air India and was familiar with the tactics that unions usually deployed in such a situation. Besides, he had been a union man himself and had led the aircraft maintenance engineers’ union during his early years in the airline. He refused to bow to the IPG’s demands. The IPG was adamant. Emboldened by past experience when weak and indifferent managements would give in easily, the union refused to back down. The usual practice was to issue the threat of a strike, and the management would come around to the unions’ point of view. Mr Gogoi, however, did not play by these rules. The IPG was called in and handed out a stern warning: call off the strike or face disciplinary action.

On 26 April 2003, the IPG members, led by their president Captain Kenneth Khan and general secretary Captain Vikrant Sansare, met the management. This was just a few days after they had launched the agitation. At the meeting, K. Roy Paul asked the leaders to withdraw the protest by 5 p.m. The IPG refused. Air India decided to suspend about two dozen pilots who had not reported for flight duty in the past one week. K. Roy Paul and his team made their intentions known to all of us in the senior management, and having conveyed the recommended course of action, they left for New Delhi. The signal being sent out was that the airline was not going to be held hostage yet again to irrational demands by the unions.

The meeting was being closely followed, and a fleet of Outdoor Broadcasting (OB) vans were parked inside the Air India complex in Santa Cruz, Mumbai. Many new television news channels were just about setting themselves up in India around the time, and almost every channel had sent its representative. After the meeting, I addressed the media and conveyed the management’s decision, which, naturally, hit the headlines in every channel and newspaper. Over the next few days, as the drama unfolded, we ensured that the airline’s position was clearly understood by all. Fortunately, the management stood firmly by its decision all through the imbroglio. Not only were the suspension orders served to pilots on the first day not revoked, several others suffered the same fate in the following days. The management also derecognised the IPG and sealed its office.