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Air India too has pruned its losses. “The
cost per available seat kilometre, even af-
terthereductioninthefleet,ishigherthan
mostfull-servicecarrierswhoareataround
` 3. And now with Air India getting into
the low-cost space, it is nowhere near ri-
val airlines which are at around `2.40. So
itscost-controlhasalongwaytogo,”says
a top executive of a rival airline.
Clearly,Jadhavstillhasalotofground
tocover.Awareofit,hehasbeguntoprod
hiscommercialstafftodomoredirectsales
and save the commission paid to travel
agents. Air India’s direct sales are only 10
per cent, which is poor compared to 60
percentofmostlow-costcarriers.Jadhav
also wants to start a feeder network with
around40smalleraircraftwhichwilllink
thekeycitieswithsmallertowns.“TheA-
319 aircraft do not match the market so
thosearebeingreplaced.Wewillgetthese
aircraftonlease.Theadvantageisthatwe
willpaylowerlandingandparkingcharges
and also save on fuel costs,” says Jadhav.
He could also monetise the airline’s real
estatewhichincludestheiconicbuilding
in downtown Mumbai. While the avia-
tionministryiskeen,Jadhavbelievesthat
option can wait.
Workforce woes
ThebiggestchallengeforJadhavremains
the wage bill of 40,000 employees. A few
monthsago,Jadhavtriedtopushthrough
a proposal to cut productivity-linked in-
centives by half. That would have saved
him around `700 crore annually. But vir-
ulent opposition from the unions and
linked to productivity.
Theotherchallengeofabloatedwork-
force too needs his attention. Air India’s
staff is three times higher than interna-
tional carriers of similar size, and as a re-
sultitswagebill(`3,200croreperannum)
is 60 per cent more than what it should
be. There is indeed hardly any justifica-
tion for a carrier to employ over 20,000
groundloadersor1,500canteenboysand
as many as 10,000 commercial staff. Jad-
havwantstospintheservicesoffintosub-
sidiaries, sell stakestopartnersandtrans-
fer the staff to the new companies. He
could transfer 20,000 ground handlers to
the proposed ground-handling compa-
ny, 8,000 to the maintenance company
and 1,500 to Air Chef or Hotel Corpora-
tion of India. With this single move the
company’s aircraft-employee ratio will
improve to the level of rivals.
But Jadhav’s game plan, apart from
needingcabinetapproval,hastosurmount
strong opposition from the new compa-
nies which are being set up. Except for
ground-handling, all the other proposals
arestuckwiththegovernment.Two,even
thoughthecabinethascleareditsventure
with Singapore Airlines Transport Ser-
vices for ground handling, the new com-
pany is not to keen to absorb the Air India
staff.Itarguesthatitcanhirecontractwork-
ers for the same work at 50 per cent lower
wages. With competition in ground-han-
dling heating up, this perhaps is the only
way to survive. This is where the new in-
centive scheme will come handy. Once
AirIndiaoutsourcesgroundhandling,the

AIR INDIA’S
80 paisa to 21 paisa now.
Unimpressedbythesenumbers,com-
petitorssaythatJadhavhasachievedthese
numbers because fares have gone up by
over 30 per cent across the country with-
inthelastoneyear.Andthetraffichasgone
up 20 per cent. So, like all other airlines,
threats of a strike forced him to pull back.
Even the independent directors have de-
cided not to touch upon this sensitive is-
sue.Nottheonetogiveup,Jadhavisback
withanewproposal:Insteadoflinkingin-
centivestothenumberofpassengerscar-
ried, these should correlate to work. So,
incentives will stay, but these would be
staff will have no work and its productiv-
ity-linked incentive will remain scratch,
which means lower salaries. But won’t
Jadhav stir a hornet’s nest by forcing em-
ployees to go at lower salaries?
It’satightropewalkthatJadhavneeds
to do if Air India has to come out of the
turbulence and land safely.

LAST CHANCE
How Chairman Arvind Jadhav plans to get the financially-crippled
airline back on track
Surajeet Das Gupta & Mihir Mishra

I
n the 18 months that Arvind Jadhav the incentives paid to the airline’s 40,000 aircraft from eight hours to nine hours a
hasbeenthechairmanofstate-owned employees, it could blow a hole of `3,000 day. That in simple terms means he can
AirIndia,hehasfacedmorethanone crore per annum in Air India’s wallet. add 32 more flights between Delhi and
crisis. Recently, the independent di- Naturally, Jadhav has asked the gov- Mumbai in a day with the same number
rectors on the company’s board de- ernment for help. “We have said the com- of aircraft. The passenger load factor for
manded the removal of Pawan Arora, the panywillneedaninfusionof `10,000crore the airline has improved from around 60
bossofAirIndiaExpress,thelow-costarm inequityandanother `10,000croreinin- per cent in the downturn to nearly 70 per
of the airline, for misrepresenting facts. terest-free loan to get back to financial centcurrently.Officesabroadthatdidnot
The directive was opposed by Chief Op- health,” says he. His demands have not generate any cash have been shut.
erating Officer Gustav Baldauf who told been met even halfway. The government
Jadhav the procedure was not followed has infused `800 crore in equity, and has Revival plan
andArorawasn’tgivenachancetodefend said that the next tranche of `1,200 crore To be fair, Jadhav knows that to regain its
the allegations against him. Meanwhile, willonlycomeifAirIndiameetsthecost- financial health, Air India needs to im-
Air India’s decision to shift domestic op- reduction targets — something it hasn’t prove its market share. Higher business
erations in Delhi to the new termi- volumes alone will kick in economies of
nal, T3, before rivals turned out to scale.Sohewantstoincreasetheairline’s
bequiteadisaster—therewerehuge JADHAV KNOWS THAT TO domestic market share to 40 per cent
cancellations, flight delays and of
course harried customers.
REGAIN ITS FINANCIAL by 2015 from merely 18 per cent
now. To achieve that, he wants to
In this chaos, the only redeem- HEALTH, AIR INDIA NEEDS more than double his fleet to
ingpieceofinformationtoreachJad-
hav’s desk was that the airline has
TO IMPROVE ITS around 280 aircraft. The capital
expenditure will be low, says he,
pruneditslosses.Theoperatingloss MARKET SHARE. HE because these aircraft will be
decreased 39 per cent from `5,672 WANTS TO INCREASE taken on lease.
crore in 2008-09 to `3,472 crore in Jadhav’sdetractorssaythis
2009-10, and the net loss fell 23 per THE AIRLINE’ S is wishful thinking for a com-
cent from ` 7,189 crore to ` 5,551 DOMESTIC MARKET pany whose efficiency para-
crore.Butcriticssaythatthesenum- metersarenowherenearrivals.
bersdonotreflectanyfundamental SHARE TO 40 PER For instance, airlines especial-
change in the airline, and this has CENT BY 2015 lylow-costcarrierslikeAirAsia,
happenedbecauseoffavourablecir- presstheiraircraftintoservefor
cumstances—theindustryisdoing up to 18 hours. Jadhav says he
well,passengernumbersaregrowingand done so far. But it could allow Air India to cannot do more, simply because that
they are also willing to pay more. raise $2.6 billion as external commercial would mean more pilots and cabin crew 2010
SodoesJadhavhaveaturnaroundplan borrowings with a sovereign guarantee. (aviation rules limit the time pilots can
for Air India which will get the financial- ThatcouldhelpJadhavsave `600crorein fly)onAirIndia’srolls,whichatthisstage
ly-crippledairlinebackintheblack?Will annual interest payout. is not feasible.
he be able to prove some of his bosses in The second part of the strategy is un- Jadhav says he has trimmed his fleet
the aviation ministry wrong that the air- der Jadhav’s control — he can make the by31to134aircraftbynotrenewingleas-
line should be closed down? airline efficient, cut costs, increase fleet es, though it hasn’t affected the average
Tobefair,Jadhav’shandsaretied.The usageandofcoursetrimthewagebilland availableseatkilometreseachdayat44,000
airline’s survival is to a large extent de- the number of employees. Last year, the km per aircraft per day. This has helped
pendent on the government which alone government had set him a target to save the revenue per available seat kilometre
canbailitoutofthefinancialmess.AirIn- `2,000crore,butJadhavfellshortbyover risefrom `2.50whichwasthelowestdur-
dia has a working capital debt of over ` 800 crore because he couldn’t push ing the slowdown last year to a healthy
` 18,000 crore, which was being used to throughawage-reductionplanduetoop- `3.50currently.Hiscostperavailableseat
fund cash losses, and this is projected to position from the unions. kilometrehoweverhasgoneupinthesame
go up to over `30,000 crore within a few Jadhav is doing what he can do to im- time from `3.30 to `3.71 now because of
years,ifthegovernment’ssupportdoesnot prove productivity and plug the losses. the rise in jet fuel prices. As a result, the
comequickly.Thismeanshigherinterest For instance, he has been able to bring up gapbetweenthecostandrevenueperavail-
payout. Coupled with depreciation and the average flying time for each Air India able seat kilometre has come down from