Yesterday’s Maharajah in ‘Mayday’ mode

It seems entirely appropriate today — and not in a good way — that Air India’s icon is the Maharajah. That’s because the story of Air India (and, indeed, of Indian aviation) is much like the story of India’s erstwhile princely rulers. Both had their days of glory, but over time, both have been reduced to being mere shadows of their former selves.

Indian aviation took off in 1932 when Tata Sons was permitted to operate a mail service linking Karachi, Ahmedabad, Bombay, Bellary and Madras. Sixteen years later, in 1948, a brand new Lockheed Constellation L-749 made its first Mumbai-Geneva-London flight for Air India International — with the legendary JRD Tata at the helm.

For many, JRD’s decision to launch the service on this sector seemed unwise. The India-UK route was dominated by established players such as Imperial Airways, KLM and Air France, and many thought it didn’t make commercial sense to take them on.

But it was a decision that paved the way for the airline’s success. For JRD, only the best would do. This meant getting the Constellation L-749, which had wowed the world by flying non-stop coast-to-coast in the US.

JRD did much to enhance Tata Airlines’ visibility internationally: he opened offices in the best locations abroad; he also invested in getting the best pilots, co-pilots and navigators from India and abroad on board; and in 1948 a person from TWA flew down to Bombay to open an airhostess training academy. Airhostesses on Tata Airlines (and, later, Air India) came to be known not only for their good looks but also for their grace and grooming. There are many who remember a Maureen, an Air India airhostess: she later married industrialist Nusli Wadia…

JRD’s commitment continued even after Tata Airlines was nationalised in 1953; at Prime Minister Jawaharlal Nehru’s request, he stayed on till he was removed in 1978.

Establishing Air India’s product differentiation seemed critical in the early years. A former AI staff recalls: “The Rajasthani jharoka (arches) motif made the aircraft seem like a flying palace.”

Under JRD, the airline established itself as a keen competitor. In 1970, when Air India inducted the Boeing 707, it became the first Asian airline to have an all-jet fleet.

Just as important, the emphasis was on running a commercially viable airline. “Between 1948 and 2001 — that is, in 52 years — the airline turned a profit in all but a handful of years,” recalls someone who was associated with Air India for over three decades and retired in the late 1990s.

A former Air India staffer, who served the airline for close to four decades, notes that the initial success owed to JRD’s insistence on acquiring the latest and best equipment.

But then, the airline hit a rough air pocket. The reasons for the descent can be found in a letter that JRD Tata wrote in 1981 to the then Chairman Raghu Raj. JRD, who was then on the Air India board, said: “In the last few months I have made four long-range flights on Swissair, Lufthansa and BA and three on Air India. The point that struck me and worries me most is the continuing fact that, whereas we hardly carry any first class passengers, their first class cabins are full, or nearly full, most of the times, despite the fact that their first class cabins have more seats than ours. I have consistently pointed out the importance of the policy which we have wrongly followed in recent years of concentrating all our sales efforts on excursion and other promotional fares, the yield from which is less than one-fifth of that of first class.”

The turn of the century marked an accentuation of the Maharajah’s decline. In 2001, Michael Mascarenhas, the last of the professional Managing Directors of Air India who had risen from the ranks, retired. Since then, this post has been taken over by bureaucrats. “With this, the decision-making process became more extended,” says a former Air India official.

Politics increasingly interfered with the management of the airline, and even due processes were caught up in red tape. And it began to tell in everything from acquisitions to service. In December 2005, when Air India signed a deal to acquire 68 Boeing aircraft, it was the first time since the mid-1990s that the airline had gone in for any acquisition.

“Once the babus took over, getting the latest and the best aircraft meant the lowest quotation,” says a former Air India staffer who was associated with the airline for four decades.

Adds a former employee, “Everything was referred to Delhi, whether it was aircraft investments, route operations or personnel. A Parliamentary Committees would be set up to review Air India’s operations. This meant foreign and domestic junkets for MPs and bureaucrats, as also gifts and entertainment.”

And then came the merger with Indian Airlines in 2007. The decision to merge the two airlines, ostensibly intended to strengthen them to take on competition, proved an unmitigated disaster.

The final straw was perhaps the granting of bilaterals to other countries, especially those from the Gulf region, which increased their flights into and from India manifold.

The cumulative result of all this was that Air India started running losses, which it does to this day. It is expected to report a net loss of ₹2,636 crore in fiscal 2015-16, against ₹5,859 crore in the previous fiscal.

Worse, it survives solely on government bailouts. In April 2013, the Manmohan Singh government announced a bailout package aimed at pulling the airline out of its financial mess and putting it on the road to profitability.

It announced that it would infuse additional funds into the airline to the tune of ₹30,000 crore till 2020, hive off the engineering services and ground-handling business, and go ahead with the induction of 27 new Boeing 787 Dreamliners.

The debt-laden carrier has outstanding loans and dues worth ₹67,520 crore, of which ₹21,200 crore is working capital loan, ₹22,000 crore long-term loan on fleet acquisition, ₹4,600 crore vendor dues besides an accumulated loss of ₹20,320 crore.

That’s quite a crashlanding for an airline that was once the pride of India.

Tomorrow: India Cements

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