Hare-brained strategy? Air India may replace team which plotted its turnaround

New Delhi: The government is looking to appoint an entirely new set of independent directors on the board of Air India. The five current independent directors finished their three-year stint last month and according to airline officials, none may be re-appointed. Much of the push to restructure loss making routes of Air India over the last three years, it is believed, came from these five independent directors. The five worthies have also kept up the pressure on the airline’s management to analyse and improve the cost economics of each route, regularly monitoring progress on this front. Last year, the quintet also risked all-round displeasure by boldly suggesting that the airline’s privatization or offloading of strategic stake by the government be given some serious thought. They had presented a proposal before the Minister of Civil Aviation, A Gajapathi Raju, but received no commitment on the issue. [caption id=“attachment_2731128” align=“alignleft” width=“385”]  PTI[/caption] It is clear that Raju does not believe in privatisation of Air India. In a candid chat with agencies, the minister has admitted that the airline’s books are so bad that there is no chance of any interested party coming forward to participate in the airline’s equity. As for the independent directors’ push for profitable routes, the massive overseas expansion that Air India has embarked upon in recent months without any in-depth study on route economics shows scant regard for the views of these directors. San Francisco, Vienna will soon be followed by one new destination each in the United States and UK and Spain. The recent move by the airline’s management, to go for massive fleet expansion, where it is considering an addition of 100 aircraft in the next few years, is also raising hackles of some airline officials who question the need for such an expansion in the absence of a clear roadmap. So what has irked the government more – the belief of these directors that government needs to lessen its control over the workings of the loss laden airline by divesting some stake, or their constant push for improved route economics? It is true that Air India reported Rs 8 crore in operational profit for the first time in a decade last fiscal. This is not only a record of sorts but also an improvement over targets it had set itself in the ‘Turnaround Plan’, under which AI is guaranteed over Rs 30,000 crore equity support from the government in a 10-year period. Though benign oil prices have helped the airline’s profitability to a large extent, the restructuring of non-profitable routes and some other cost saving measures being supervised by the independent directors have also helped. Remember, it is under their watch that the airline actually managed to show any profit at all – the Rs 8 crore figure is operational profit and unaudited as of now. With these directors moving out, will equal emphasis on route economics remain, is the key question. The outgoing independent directors on the board of Air India are: former Procter & Gamble India chief and writer Gurcharan Das; IIM Ahmedabad professor Ravindra H Dholakia, retired Air Marshal K.K. Nohwar (former vice-chief of the Indian Air Force); banker Renuka Ramnath and founder director of IIT Roorkee, Prem Vrat. Gargi Kaul and B S Bhullar are the two government nominees on the airline’s board. Other directors are CMD Ashwani Lohani, Director Finance V Hejmadi, Director Personnel N K Jain and Director Commercial Pankaj Srivastava. Names of new appointees are not official as of now. But among the contenders are well known people from the world of banking (a renowned lady banker heading one of the largest public sector banks and a veteran banker credited with setting up one of India’s largest private banks). Also, retired bureaucrats and a travel industry professional - who is believed to be close to a minister in the NDA government - seem to be on the list. Is this medley of people good enough to secure Air India’s future? As per this story in Business Standard, one of the outgoing independent directors, IIM Professor Ravindra H Dholakia had said earlier that the airline’s employees need to change their work culture and outlook. Dholakia was also a member of the Dharmadhikari committee which was set up to complete the HR integration of the erstwhile Air India and Indian Airlines. With an emphasis, rightfully, on lessening loss making routes and a push for privatization of Air India, did the independent directors chart out a course which was far too independent for the government’s liking? Around March last year, they had taken an earlier proposal on privatisaton to Civil Aviation Minister A Gajapathi Raju. It seems these independent directors had suggested that the process of privatization may be started with two businesses which were earlier spun off from the airline - engineering and ground handling. Air India Express could also be considered under this scheme. In a board meeting of Air India in March last year, one independent director who is a strong votary of privatisation asked about the financial performance of Air India Air Transport Services Ltd (the ground handling subsidiary) and also about the Air India Engineering Services Ltd (the engineering subsidiary). This director said the process of disinvestment could begin with these two companies even though a third, Air India Express, could also be considered since it has been making operational profits since FY14. Air India’s independent directors have never really had a say in the airline’s management. In 2010, the then Civil Aviation Minister Praful Patel had brought in well known names such as M&M chief Anand Mahindra, Ficci’s Amit Mitra, Ambuja Realty’s Harshvardhan Neotia, Dubai based industrialist Yusuff Ali and former Air Force Chief Fali H Major. But these directors faced enough hurdles during the subsequent board meetings to finally resign from their positions within one year. As per this story, the directors had complained to Patel’s successor Vayalar Ravi about the work culture at the airline, its on-time performance and other issues. This time, as the government again sets out to install independent directors on the Air India’s board, it should keep in mind that getting professionals who have been turnaround specialists, people with cost management skills and those who genuinely want to improve Air India’s future should be inducted. Else, Air India’s books will remain bad for many more years despite its operational performance improving.