Govt must infuse equity in Air India: Former MD

Here is a verbatim transcript of the exclusive interview with V Thulasidas on CNBC-TV18. Also see the accompanying video.

Q: Whether it is Rs 4,000 crore or Rs 14,000 crore, in terms of the bailout package that the government is actually looking for, what needs to be done in addition to the equity infusion to manage this bailout package to ensure that it actually works?

A: I think all the airlines in India are in financial trouble. I think all of them really need support now if all of them are to survive. Air India is owned only by the government and therefore if there is to be equity infusion only the government can do that.

Jet Airways or Kingfisher or any other airline can have the other shareholders contributing equity. So, while equity infusion by the government I think is a must in the current situation. Air India will have to come out with a plan to convince the government that it can manage to bring the airline back to a sound footing by way of completing its merger process, which should be priority number one, and of course its marketing so that revenues come in.

The problem is that the market has been shrinking for one reason or the other that affects not only Air India but all airlines. But the airline needs to see that it can get its share of the market at a price, which will be able to cover the cost. This, the airline has to convince the government.

I think if it can complete the merger fast and bring up its revenues and improve its marketing then Air India of course can convince the government and the government ought to give financial support that is required now.

Q: What about cost cutting at the end of the employees' side? You have talked of enhancing marketing but one of the key issues that always comes up is the fact that there are service standards that need to be enhanced, you need to cut costs, there has been an announcement today by Air India that they are looking at cutting up to Rs 500 crore. But every time there is this howling of protests and nothing really happens. How is this Rs 500 crore cost cutting really going to happen? How are you going to rationalise employee costs? You have an unprecedented situation where senior employees have been told to forego salaries. How do you see the current management managing this cost?

A: I think Air India is still not the only airline with this problem. You know that Jet Airways has asked its senior management. So forgo up to 25% of its salary and not just for one month but for quite sometime. I think all airlines are making cost cutting efforts including man power costs. In Air India a similar effort needs to be made and I think a beginning has been made. Now obviously the number of employees in Air India can't be reduced just like that in the public sector environment nor is it necessary really speaking. We have been adding aircraft. We have been increasing flights with the not even the same number of employees. The number has come down through normal attrition without additional recruitment. Perhaps there is additional work, may be redeployment is required but yes on the remuneration front deferring salary or forgoing salary or reducing salary are all things need to be looked at but in consultation with the employees because they need to be taken onboard and they need to be told clearly which I believe the senior management has conveyed to them that they have to be part of this very painful but remaking process.

Q: As somebody who has sort of seen what really goes on with employee union at Air India, there is a talk of scraping the performance linked incentives scheme so on and so forth. Now we understand that the proposal has been doing rounds between the Civil Aviation Ministry and the Finance Ministry and the government actually would like to see riders attached to any sort of bailout package. To your mind what could be outside of marketing and outside of cost cutting measures on the employee's side, what could be the out of the box ideas that Air India can actually employ to make this bailout work?

A: Any government or anyone who gives money is bound to ask the airline to accept certain conditions - it is quite natural. I think as far as performance linked incentive (PLI) is concerned there is a need for reform in that. Even when I was there we have appointed a group of experts including several from outside the airlines to look at performance linked incentive and make it really performance based.

If the airline is able to link the incentive to real individual performance, I think the airline really stands to gain, the employee's stand to gain. So, there is a reform required there.

Now to what extent, which levels will be rationalised to reform is not for me to say but I agree that there is a need for reform in what is called the PLI. The overriding importance has to be given to performance because it is the employee performance that can save Air India in the days to come.

Let's remember one thing that Air India has some of the most skilled and experienced people in aviation not just in India. It is after all one of the oldest airlines in the world.