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What ails India's troubled maharajah?

Air India plane coming in to land in Mumbai
India's national airline is in deep trouble

India's state-run and oldest airline Air India is bankrupt. Shantanu Guha Ray explains what ails the airline which carries one of India's most enduring mascots - the maharajah.

They are calling it the case of the bankrupt maharajah.

Saddled with lost man-days, unwarranted expenses, unviable routes and huge salary bills, the state-owned Air India - the airline with a mascot of a maharajah or Indian king - is in a mess like never before.

Its losses have almost doubled to over $800m in 2008-09 and it does not have the money to foot the monthly salary bill of its 31,500 employees.

Top managers have been asked to forgo their June salaries by a management that is intent on sacking excess staff.

Air India holds 17.4% of the domestic market and 23.5% of the market for flights coming in and going out of India.

Many of its routes are inherently loss-making but politicians have pushed such routes for other reasons.

A good example is the recently introduced Srinagar-Dubai flight that carries on average 20-30 passengers on a 180-seat aircraft.

Bleak

Air India's monthly salary bill is a whopping $650m. Lower rung employees represent almost 71% of the airline's 31,500-strong workforce and account for about 19% of the annual wage bill.

India's civil aviation minister Praful Patel has already met the prime minister and sought a $3.12bn bail-out.

But the chance of immediate cash flow is bleak because Delhi's top priority is to present the budget next month.

AIR INDIA
Air India
Air India began operating in October 1932
The airline has a fleet of 147 aircraft
Air India holds 17.4% of the domestic market and 23.5% of the market for flights coming in and going out of India

Indeed the prime minister told Mr Patel that they may only get partial funding.

"There will be no blank cheque for Air India," Mr Patel said recently.

In fact, agreeing to the bail-out would be like promoting a student who has failed in all subjects, say experts.

"Air India will have to earn its bread and some tough decisions will have to be taken," Mr Patel said.

For years, many have complained about the lackadaisical way the airline, currently cash-strapped and losing an estimated $3.12bn, is run.

Currently, Air India has 210 employees per aircraft - that is nearly double the global norm.

Air India cabin crew - recruited before 2004 - still work on average between 50 and 55 hours per week while the global norm is 70 hours a week.

Pilots on the international sector are paid in dollars and make up to $15,000 every month and stay in five-star hotels when on duty.

They get an incentive allowance that is not linked to the national carrier's productivity. As a result, they can make more money when the carrier is making losses.

Pilots in some of the world's top airlines have accepted pay cuts and unpaid leave.

Air India engineers with 15 years of experience make more than 200,000 rupees per month, although their productivity reportedly is estimated to be 40% of international norms.

And employees who are union representatives for cabin crew and ground staff are officially exempt from doing work. Air India pays them their salaries, flying allowances and maintains their union offices.

Mess

All of this has slowly added up to create the present mess.

Air India has already decided to cut its salary bill by $100m and told workers that the June pay packet would be delayed by 20 days.

Among those who will get a delayed cheque is the Indian cricket skipper, Mahendra Singh Dhoni, the brand ambassador for the airline.

Inside Air India first class
The airline bought over 40 new planes in the last one and a half year

The airline has also allowed its employees - except aircraft engineers and pilots - to go on unpaid leave for two to five years. People could even work for rival airlines.

But not many are ready to go without pay or to take advantage of the voluntary retirement scheme that is on offer.

VJ Deka, secretary of Aviation Industry Employees Guild, said salaries should not be delayed.

Air India chairman Arvind Jadhav has written a personal letter to highlight the current crisis.

"We must face the heat," wrote Mr Jadhav, listing how some top international carriers suffered losses over the last six months and fired their employees.

Many say the airline suffered after a merger two years ago between the profit-making Indian Airlines and Air India, which was making losses even then.

The aim was to make Air India one of the top 10 airlines in Asia and among the leading 30 airlines globally.

The International Air Transport Association (IATA) says the global aviation industry is expected to lose about $9 bn this year while the New Delhi-based Centre for Asia Pacific Aviation (CAPA) has estimated that the Indian aviation industry will incur around $2 bn losses during the same time.

The airliner has also decided to phase out old aircraft and pull out from unprofitable routes. It will lease to anyone willing some of its prime properties across India.

But that could be a distress sale.

Currently, there are no serious bidders for the airline, not even for its famed building at Mumbai's Nariman Point, considered one of India's most expensive addresses.

The cashless maharajah must decide what he wants to do with his excess baggage. And, of course, wait for the cash to come in.

The writer is an editor with Tehelka magazine



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