The need of the hour is complete autonomy which is not likely unless the government is prepared to relinquish control of the airline

The deteriorating financial state of the national carrier Air India is beginning to cast ominous shadows on its continued viability and is raising serious doubts about its very survival. In the emerging economic environment, it is abundantly clear that the government would not be in a position to carry the financial burden of sustaining the airline for long. Presumably in response to the problem, the government has inducted five heavyweights to fulfil the requirement of five independent Directors on the Board of Air India. The Directors are Anand Mahindra, Vice Chairman and Managing Director, Mahindra and Mahindra; Amit Mitra, Secretary General, Federation of Indian Chamber of Commerce and Industry; Harsh Neotia, industrialist; Air Chief Marshal (Retd) Fali H. Major, former Chief of the Air Staff; and Yusuf Ali, Managing Director of a Dubai-based Emke Group of Companies that run shopping malls, hypermarkets and department stores. The mandate before the newly constituted 15-member Board duly reinforced with the recently inducted five individuals of repute, would be expected to battle the challenges and turn the ailing airline around.

As a first step, the new Board of Air India has defined a clear timeframe for the finalisation of a turnaround plan and has also selected Gustav Baldauf for appointment as the Chief Operating Officer (COO). A former employee of Austrian Airlines and in the recent past the Vice President (Flight Operations) in Jet Airways, Gustav Baldauf brings with him 25 years of experience in the aviation industry.

The grim financial state of the airline is not an overnight development, but the result of mismanagement, flawed decisionmaking and cumulative neglect over several years. Major strategic blunders such as bulk order for 111 airliners valued at over Rs 50,000 crore with an equity base of a paltry Rs 145 crore, without proper assessment of the business potential and demand growth as also the expensive and fruitless exercise of merger of Air India and Indian, have been financially debilitating for the airline. Further, towards the latter part of last year, in an effort at restructuring mandated by the government for the airline to be eligible for financial support, Air India appointed a number of foreign consultants at enormous cost to help improve the operating efficiency. While the intention might have been noble, high profile foreign consultants do not necessarily provide cost-effective solutions. More often than not, their solutions are not easily affordable and hence may not be implementable. It is not surprising therefore that despite heavy investment in hiring the services of foreign consultants, there has been no perceptible change in the fortunes of the airline in the last few months. On the contrary, losses continue to mount and have now reached almost irredeemable levels. The financial distress has been compounded further by Air India’s desperate and expensive bid to join the Star Alliance. Although Air India has a commitment to shell out Euros 10 million (Rs 60 crore) for the membership of Star Alliance, membership is not guaranteed.