Our Biggest High Was Posting Operational Profits For Two Years Running: Ashwani Lohani, Chairman & MD, Air India
You have been known to go deep into the day-to-day running of Air India during the course of your association with the national carrier. This has resulted in significant operational and administrative improvements in Air India’s flight path. Could you elaborate on this?
It is necessary for the chief executives of large corporations to provide vision, guide the execution of the vision and if required dive deep into operational issues. Yes, I have been doing that regularly as my stressed airline often needs intervention from the highest levels. And my direct involvement also helps in keeping the morale high.
Yes, there have been significant administrative and operational improvements and but for the legacy issues, huge debt and the inherent constraints imposed by the governmental way of working, we would have soared much higher than the rest.
During my first stint from 2015 to 2017, we introduced almost ten new international flights and during the present tenure, we have announced twelve new international flights since 1 April 2019. This number shows our inherent strength.
Recently, we took a bold decision of putting our entire domestic inventory on only one GDS (Travelport) as against four in the past, thereby saving substantially. Another out-of-the-box initiative was that of interchanging the aircraft plying between Delhi and London and Washington. The B777 flying to Washington was interchanged with the B787 flying to London and would make a difference of almost Rs 100 crore to our profit/ loss in one year.
A lot more can be achieved if we take this airline on the path of transformational reforms, but obviously this is not the right time for the same as we are on the block.
What are the highs and lows that you have experienced as the head of the Air India so far?
The biggest high was posting operational profits for two years running, in 2015-16 and 2016-17 and this happened after a gap of 10 years. We proved to the world that left to us we can run this airline as well as anyone else.
The flight from Delhi to San Francisco launched on 4 December 2015 was another big high because it was the longest flight in the world and one of the biggest successes of international aviation.
Our new international flights to Toronto, Nairobi, Kuwait, Doha and Stanstead also kept us on a sustained high with each new flight giving energy to the men and the organization. Our efforts to be EBITDA positive this year despite a large number of grounded aircraft would also give us a big high. Recently, the national mission of evacuation from Wuhan gave us a big high.
The huge debt that constrains our working is our biggest low. Another low is our inability to grow by adding fleet. Whatever new flights we are starting are with existing aircraft — we are still flogging the old aircraft.
Our inability to recover 12 narrow-body aircraft that are on the ground for much more than a year for lack of funds is a bit low.
Of course, then there is the issue of delayed salaries that often pulls the morale down.
In the run-up to the privatization of Air India, how attractive is the airline to prospective buyers?
With flights to 43 international and 84 domestic destinations, we have a massive reach. On the safety front, we are easily the best. When you fly with Air India you can feel the smooth landing and the difference in service as compared to other carriers. We have solid systems and associated infrastructure for engineering and training and the most experienced pilots, cabin crew and engineers. It is a fully functional airline that operates over 450 flights every day. It is definitely not Jet Airways, which suddenly disappeared.
Air India is easily the best-known brand of India.
The airline business is the toughest of all businesses being highest on technology, highest in regulation, lowest in margins and highest in competition. The new Air India won’t be constrained by the rules and processes and would, therefore, be able to expand and grow at a rapid pace eclipsing its rivals.
Overall Air India is a solid airline and extremely attractive for any prospective buyer.
Given the financial situation and the recent approval by GoM of the document inviting Expression of Interest (EOI) for sale — what will the next few months bring?
We will keep flying high. There have been occasional rumours of shutting down but those are just rumours-plain and simple. We would however not be able to add flights in the interim as we have exhausted whatever margins we had. Yes, the coming months are going to be tough no doubt, a crucial time for the airline but we will get over that.
According to you, what are the main reasons that have led to the gradual weakening of Air India?
The merger of Air India with Indian Airlines led to the downfall. The merger was a disaster because they were both culturally different entities with different pay scales, different processes, different kinds of aircraft and most of all different mindsets. This merger was an exercise imposed on two organisations that were doing well independently, which led to a deep dive into losses and debt.
After the merger, the losses went sky high. At that stressed time, the airline also decided to buy planes though that was a good thing because if those aircraft had not been bought, Air India would have had zero planes at present. What was not good was making the airline take loans to buy new aircraft thereby stressing it further. Subsequently, the government decided to demerge the airline and form separate subsidiaries for ground handling and engineering thereby adding to the already compounding mess. All this together made the airline go into a nosedive and remain in losses for almost ten years. Being in red for ten years continuously was also a gross management failure.
As per CAPA, FY20 will see significant losses posted by the airline sector. What are the challenges being faced by the sector as a whole?
The biggest challenge for airlines is the cut-throat competition with fares going down rapidly in real terms. The airline pricing mechanism with competition was thrown intends to bring fares down. From Delhi to Mumbai the average fares are still Rs 5,000 the same as almost two decades back. Costs have gone up substantially over time while the fares have not kept pace and therein lies a very serious problem that somehow needs to be addressed.
