Current Market Share of Air India
Air India holds 17.4% of the domestic market and 23.5% of the market for flights coming in and going out of India.
Losses incurred by Air India
AI is making a loss of Rs 15 crore per day, up from the earlier Rs 11 crore. AI has no money at all to pay salaries.
What AI wants from the government?
AI has sought a Rs 10,000-crore bailout from the Union government. AI has tried to defer the salary payments of staffers by 15 days and suggested that senior staffers skip the salary for June.
What is government’s reaction to AI’s demand?
Government has agreed to help Air India but has mentioned that AI will have to tighten its belt and draft a plan for airline’s revival. Government is wary of setting up a precedent for other public sector companies. Also, the government is itself strapped for funds and cannot be seen squandering public money on inefficiently run failing public enterprises. Recently, Prime Minister has agreed to bail out AI but has outlined that AI will have to prove its efficiency if it wants the bailout. The bailout sum is not clear yet but is supposed to be atleast half of AI’s demand.
Why did Air India fail?
The airline is still run on decades old business guidelines and failed to modernize itself to keep up with the agile private airlines launched in India after the economy opened up in 1991. Here are a few instances that demonstrate the fact -
(source http://news.bbc.co.uk/2/hi/south_asia/8125719.stm)
• Cabin crew recruited before 2004 work on average between 50 and 55 hours per week, though the international norm is 70 hours weekly.
• Pilots flying on the international sector are paid around Rs 7 lakh per 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. Compare this with Singapore Airlines, where pilots have agreed to take pay cuts and non-paid leaves, just because the net profits are down by half (it is still making profits).
• Engineers in Air India with 15 years of experience make more than Rs 2 lakh per month, though their productivity is estimated to be 40 per cent of the international norms.
• Air India has 210 employees per aircraft - that is nearly double the global norm.
Apart from these factors, the hold that the government and bureaucrats have on the national carrier further limits its operational efficiency. Due to political considerations, they force the airlines to take routes that do not give good traffic.
AI has also asked for fleet expansion at a time when the overall world air industry is cutting down operations. BJP has recently confronted Congress about the purchase decision of 111 aircrafts at the time of downturn. Th deal was worth Rs 55,000-crore.
Below is an Anecdote about Air India’s ways of operation that I read in the newspapers a few days ago.
Captain N K Beri, refused to pilot flight AI-822 to Delhi after taking off from Riyadh because of faulty landing gear. His decision to turn back may seem prudent to you and me but not to the Air India officials. They have not only grounded the pilot, but also, stopped his salary because of the monetary losses that AI had to incur.
Current State of World Airline Industry
The world airline industry is not doing so well either. The world’s airlines lost more than $3 billion in the first quarter of 2009, the International Air Transport Association (IATA) declared on 30th June 2009 and has maintained its estimate for full-year losses of $9 billion. The major reasons cited were that of weak travel demand and lower freight volumes in the global recession.
Also, they have mentioned that the decline was before the global oil prices rose and now with oil prices surging again, the condition will detiorate more. Both oil and jet fuel prices have risen almost $20 a barrel in the past two months, and are now 75% higher than their low point at the end of 2008.
Air India holds 17.4% of the domestic market and 23.5% of the market for flights coming in and going out of India.
Losses incurred by Air India
AI is making a loss of Rs 15 crore per day, up from the earlier Rs 11 crore. AI has no money at all to pay salaries.
What AI wants from the government?
AI has sought a Rs 10,000-crore bailout from the Union government. AI has tried to defer the salary payments of staffers by 15 days and suggested that senior staffers skip the salary for June.
What is government’s reaction to AI’s demand?
Government has agreed to help Air India but has mentioned that AI will have to tighten its belt and draft a plan for airline’s revival. Government is wary of setting up a precedent for other public sector companies. Also, the government is itself strapped for funds and cannot be seen squandering public money on inefficiently run failing public enterprises. Recently, Prime Minister has agreed to bail out AI but has outlined that AI will have to prove its efficiency if it wants the bailout. The bailout sum is not clear yet but is supposed to be atleast half of AI’s demand.
Why did Air India fail?
The airline is still run on decades old business guidelines and failed to modernize itself to keep up with the agile private airlines launched in India after the economy opened up in 1991. Here are a few instances that demonstrate the fact -
(source http://news.bbc.co.uk/2/hi/south_asia/8125719.stm)
• Cabin crew recruited before 2004 work on average between 50 and 55 hours per week, though the international norm is 70 hours weekly.
• Pilots flying on the international sector are paid around Rs 7 lakh per 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. Compare this with Singapore Airlines, where pilots have agreed to take pay cuts and non-paid leaves, just because the net profits are down by half (it is still making profits).
• Engineers in Air India with 15 years of experience make more than Rs 2 lakh per month, though their productivity is estimated to be 40 per cent of the international norms.
• Air India has 210 employees per aircraft - that is nearly double the global norm.
Apart from these factors, the hold that the government and bureaucrats have on the national carrier further limits its operational efficiency. Due to political considerations, they force the airlines to take routes that do not give good traffic.
AI has also asked for fleet expansion at a time when the overall world air industry is cutting down operations. BJP has recently confronted Congress about the purchase decision of 111 aircrafts at the time of downturn. Th deal was worth Rs 55,000-crore.
Below is an Anecdote about Air India’s ways of operation that I read in the newspapers a few days ago.
Captain N K Beri, refused to pilot flight AI-822 to Delhi after taking off from Riyadh because of faulty landing gear. His decision to turn back may seem prudent to you and me but not to the Air India officials. They have not only grounded the pilot, but also, stopped his salary because of the monetary losses that AI had to incur.
Current State of World Airline Industry
The world airline industry is not doing so well either. The world’s airlines lost more than $3 billion in the first quarter of 2009, the International Air Transport Association (IATA) declared on 30th June 2009 and has maintained its estimate for full-year losses of $9 billion. The major reasons cited were that of weak travel demand and lower freight volumes in the global recession.
Also, they have mentioned that the decline was before the global oil prices rose and now with oil prices surging again, the condition will detiorate more. Both oil and jet fuel prices have risen almost $20 a barrel in the past two months, and are now 75% higher than their low point at the end of 2008.
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