Air India is the shining example of how bureaucracy can mess up an airline, and thrown in with the political interference and the unions around, and it works out more to a fiefdom rather than an airline run professionally. The airline has been in serious turmoil since the merger of Indian Airlines, a domestic Indian airline owned by the Government of India, and Air India, which used to service only international routes back in the day. They have a loan on their head which they are unable to service, and the Government of India has promised them INR 42,000 Crores of Equity infusion (about 6 billion US Dollars).
It turns out, the airline needed to meet some targets to win this support from the Government of India. And they have been understating their losses for many a years, as audited by the Comptroller & Auditor General of India (the Government’s official auditor). From the Mint:
Air India “significantly” understated its losses during the period under audit.
The understatement of losses was to the tune of Rs1,455.8 crore in 2012-13, Rs2,966.66 crore in 2013-14 and Rs1,992.77 crore in 2014-15.
For the uninitiated, that is USD 220 million, USD 435 Million and USD 300 million approximately on today’s conversion. Which means about US Dollars 1 billion of losses were understated.
How the hell did they managed to do that? The Mint report tells us more…
Air India’s working capital requirement exceeded the prescribed limits, which resulted in the airline availing of additional short-term loans. The increase in working capital requirements and a consequent increase in short-term loans was due to its failure in generating projected revenue. That’s mainly on account of its inability to meet its asset monetization target and increase in staff costs.
In these years, in contravention of rules, Air India approved the promotion of 2,482 managerial employees, allowed crew members to stay in five-star hotels and free passage for family members of staff. The airline also did not meet targets set for utilization of planes and on-time performance but was able to do so for yields.
I’m waiting to get my hands on the full report to be able to post more details. It is still not out in public circulation so depending on news to put out the relevant parts.
Bottomline
I’ve said this back in the day and I say it again. This is an airline which is beyond repair at this point of time and a dramatic approach is required to get the airline back on track. I seriously hope they stop draining our tax money on this airline sooner than later, and bring to task those who fudged the books of the airline.
I flew AI from LHR-DEL-SYD on the new 787 which felt like 10 years old due to bad/no interior maintenance. Surprisingly business class was pretty decent. I asked the crew when we landed how long they stayed in Sydney. They said 4 nights. RIDICULOUS!!! Just an example of why/how they are broke.
Makes you wonder what else they’ve lied about? Safety records? Hmmm.
I also read somewhere in the context of this report that the new 11 or something routes approved by Lohani lost ~INR 2200 crores altogether.
Makes you wonder if he is just expanding for the sake of it, or is he desperate to parade this as progress? Egos and short term shiners should have no place in top cadre of management.