Saving the Maharaja: Arvind Jadhav's plan for Air India

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The Next Move

Clearly, the battle to save Air India is at a particularly interesting juncture. "Right now my turnaround strategy is like a chess game," says Jadhav. "My opponents are waiting to find out what my next move will be." A lock-out would have broken the back of the unions. And if it lasted 15 days, all the existing wage agreements with the unions would have lapsed, allowing the airline to push for a big round of cuts and more flexible employment terms.

Instead, his opening gambit - to cut the pilots' allowances by half - may have backfired to some extent. The airline has had to restore payments on the advice of its legal team. Besides, a strike in the crucial winter season - when load factors are likely to peak - would be debilitating. But now, in return, if Jadhav is able to get the unions to agree to a new set of employment terms that allows the airline to push through structural changes on its fleet and routes, losing the first battle may well be worth in the war that's still waging.

Getting the government to buy into his plan is another huge challenge. Inside the government, there is still no consensus on how to deal with recalcitrant unions. Allowing a disruption in Air India's schedule is not in the nation's interest, says a senior bureaucrat at the PMO. "After all, in many cases, it is the only airline that connects some locations around the country," she says. "The big question is, how much can the government stomach?'' asks Jadhav. "As CEO, I can only present a set of options. How much they are willing to take up is entirely up to them."

"The problems that Air India faces today are not all that different than the ones that confronted several state-owned European airlines in the past," says Perry Flint, editor of US airline trade magazine Air Transport World, who has been tracking the industry for long. "A bloated workforce, constant meddling and interference from the government in important decisions like labour contracts, fleet and network, weak balance sheets and an overall mindset among staff (and many managers) that their status as a state-owned airline guaranteed them jobs for life were common in British Airways, Lufthansa and Air France," he says.

All three were privatised and turned viable. Air France and Lufthansa received substantial cash-injections from the government in the early nineties to prepare them for privatisation. The airlines have since consolidated operations through a series of mergers with smaller carriers and remain the flagship carriers for their countries, despite being privately traded companies.

"The important question is whether the Indian government can step back or whether it will it be unable to let go like in the case of the Italian and Greek governments?" Flint asks. Incidentally, Alitalia and Olympic Airways have both been privatised this year after a long struggle with bankruptcy. Government ownership has not proved to be uniformly bad for airlines. One of the world's greatest airlines, Singapore Airlines, though a listed company, is majority-owned by Temasek, an arm of the Singapore government.

Getting Things Done

Privatisation of Air India is nowhere on the horizon, says a highly-placed official in the PMO. The government has no option but to fix things before it can attempt an IPO or set it up for divestment. But Jadhav isn't looking that far. He has more pressing problems on hand.

For instance, he's been asked again and again why the airline isn't advertising its new fleet. The super-luxurious cabins in it are on par with the best in the world. "I don't have the money to market. Besides, spending money on marketing means wining and dining large clients. But when it comes to the moment of truth, they fly another airline," says Jadhav.

That, he argues, is partly because the product quality today starts deteriorating at the first point of contact - the booking interface. This continues at the airport - the process of checking in and boarding, at the gates, to the aircraft and in it and finally at arrival with the baggage, he says. "We've got to recognise we are in the hospitality business," he adds.

His first port of call though is improving on-time performance. The focus on monitoring departure time is now relentless. The entire team, from the check-in staff to pilots and crew are gearing up for the chocks to be off by D-10 (departure time minus ten minutes) and ask air traffic control for clearances to take off. "There is [an] urgency for on-time departure that was never seen before," says a traffic in-charge at Mumbai airport. Everybody is clear they have to slice minutes off the departure time. Counters have to close at D minus 30, irrespective of pressures from high-profile passengers.

Jadhav is also phasing out older aircraft. While it spruces up the image, it also saves dramatically on fuel costs. The older Boeing 747 burnt 12 tonnes of fuel for each hour of flying. The new 777 though consumes half that much.

While he has scored a few early wins, not everybody is convinced Air India can fly yet. Kapil Kaul of CAPA (Centre for Aviation in Asia-Pacific) is among the sceptics. Firstly, such a change cannot be led by one person, he says. There is a need for multiple change agents to head crucial functional areas like commercial, finance and operations. CAPA research indicates that Air India's debt will grow to USD 12 billion by the time new aircraft acquisitions are complete. This, he says, will lead to an interest burden of Rs 9,000 crore over the next three years. Air India is one issue in India that gets perfectly rational people to think irrationally. There is just too much emotion and politics, he laments.

Meanwhile, Air India has begun looking for the change agents. It has advertised for a new position, that of a chief operating officer (COO). Jadhav says the response to the global ads has been encouraging and the possibility of hiring an expat with experience is not ruled out.

For the moment though, Jadhav will be the lone wolf dealing with the challenges of a fractured organisation. There is little cohesion among the 40 Executive Directors and the hundred-odd general managers on the team. In an early circular, he took away most of the decision making from them. "It is impossible for the CMD to work with some of them, because they have been part of the problem," says a director, who did not want to be named.

Getting things done through the team is tough. Three of the operational heads of customer services (Manjira Khurana), integration (Vineeta Bhandari), ground handling (Anita Mitroo) and marketing (Rohita Jaidka) have dug their heels in Delhi and refused to move to Mumbai, despite the management ordering them to do so. Dozens of letters and notices have been exchanged, with no result.

A similar situation continues down the line with the executive directors not seeing eye-to-eye with line managers. Over the past two years, that the merger is being implemented, the focus has been completely on integrating positions at the top. This has clearly not worked. This is now being given a quiet burial. Integration of the business and operational parts are likely to be pursued much more closely now.

As things stand, the unions aren't ready to accept the kind of changes that the management and the group of ministers seem to be trying to drive. A lockout is clearly the elephant in the living room. The sooner everyone acknowledges it the better.

By: Cuckoo Paul/Forbes India