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Air India – Journey from Most trusted Brand to Most rusted one!

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Flights Cancelled! But, like a good sibling, Indian Railways has come to passenger’s rescue by running special trains for stranded fliers of Air India. And, why not? It reminds me of a typical story of a cunning monkey benefiting from the cats’ fight.

Surprised by the title? Well, not so long ago was Air India (AI) ranked as the ‘Most Trusted Brand’ in Indian Aviation sector by the Economic Times Brand Equity Survey 2010 and Reader’s Digest Trusted Brand Gold Award. But, it seems that the complacent management has turned the goodwill of trust into a rusty feeling.

Yes, it’s the 6th day that the strike of the AI pilots have entered into, based on the charges of rampant corruption and mismanagement. 90% of the carrier’s domestic flights have been disrupted. In fact, the pilot’s association has also submitted a list of suggestions called the ‘100 Turnaround Points’ to the management to revive the ailing company.

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What’s more? The whip is coming from either side. A Parliamentary Standing Committee report points out that AI was made to withdraw services from “lucrative and profit earning routes” in the name of “route rationalization” while being forced to operate flights on loss making routes.

On the other hand, CAG has questioned AI’s ongoing acquisition of passenger aircraft, as not based on proper due diligence, and massive mismanagement in term of borrowing rates and choice of routes to operate which were rendering cash losses to this largest airline in the country in terms of fleet.

Last three years has been truly forgetting years for the beleaguered Air India with net losses of Rs.2226 crore in fiscal 2007-08; and Rs 7189 crore and Rs.5551 crore for fiscal 2008-09 and 2009-10 respectively. Additionally, last year, government had also infused Rs.2000 crore of fresh equity into the debt-ridden, cash-strapped state-run carrier.

Even with its enviable fleet size, the same optimism does not reflect in AI’s passenger traffic, occupancy levels, and market share of the airline – which is at a distant 4th position behind privately-owned Jet, Kingfisher and IndiGo.

In what could be the worst debt trap for an airline company at around Rs.40000 crore; AI is reportedly incurring a loss of Rs.26 crore per day, with all its earnings being exhausted in repayment of interest on aircraft loans, fuel expenses and huge working capital debt tagged at higher rates.

I am not sure how frequently you travel by flights and avail of AI services; but one thing for sure that your hard-earned tax payments are certainly going down the drain with all the losses and mess that the national carrier is currently finding itself in.

The government cannot just give millions of rupees to bail out the airline and hope that the carrier will get its act together. The way I see it, given the theatrics – I am skeptical if the existing management has crossed the line which is beyond correction.

What’s the way out? Should govt bail the airline out with the tax-payer’s money?

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