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October 24, 2000
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Interview / Capt SP Varma & Capt KR Singh

'We can make Air-India profitable in two years'

Part I: 'It's absolutely easy to turn around Air-India'

Part II: 'Pilots are not unnerved that corporates like the Tatas are also bidding for Air-India'

Do you really think the problems would be resolved if the pilots succeed in their bid to take over Air-India?

Capt Singh: I feel so because, like I said, the strategic partner is going to put in so much money, they are going to have a clear-cut understanding with the government as to what level of interference can be accepted.

And I don't think there will be any wrangle over this. They will always have an exit clause, just in case, if there is too much of interference.

Air-India has a code-sharing tie-up with Richard Branson's Virgin Atlantic. Do you have any views on that?

Capt Varma: The code-sharing is only for two flights.

Capt Singh: It is certainly not a forward-looking tie-up. If Virgin flies twice into India, with a little bit of effort, it basically means that you are terming these as two terminator flights.

Will Air-India's divestment plan take off on a smooth note? So with our utilisation rate of the classic Jumbos, which is less than five at this point in time, you increase it by one hour, our own aeroplanes could have done that whole thing.

The entire revenue generated would have come to Air-India. Now we have to share it with Virgin and Emirates. And now, Emirates is coming into Chennai. So these are just one-odd flight or two flights. Within in-house, getting our act together, we could have taken all these flights.

We have written to the management (not directly to the government) about this. These things have to be done through a certain proper channel.

The response has been nil.

Will you review the major decisions of the last few years if you take over Air-India?

Capt Singh: If our bid is successful, there will be a review of some questionable business decisions taken in the last few years. We have to see what is in the larger interest of the airline.

Capt Varma: Bad decisions must perforce be reviewed. All this will be done, of course, along with the corporate house with whom we are tying up.

Capt Singh: Wet lease of aircraft, change of logo, getting Dolton cutlery... millions have been spent indiscriminately on these. No questions were asked.

Capt Varma: When the productivity-linked bonus was as high as about 40 per cent for general sales agents... it caused phenomenal losses to the company.

Capt Singh: Just the wet lease deal has cost the company about Rs 1.3 billion. When we signed the wet lease, even a full load was not good enough for a break-even point. I mean, the aeroplanes on the wet lease, even if they were flying full load, the deal was such that we have to pay back so much that it was not really worth having it.

Capt Varma: Then there is that out-of-court settlement. How about the money spent on taking the lawyers from India to the UK, their stay? All the costs were reflected under the head of operating crew expenses!

Air-India has accumulated losses of some Rs 12 billion and working capital loans of Rs 11 billion. How do you plan to beautify the balance-sheet?

Capt Singh: The whole process of getting the balance-sheet into shape has started. I think Air-India has paid back some of the Rs 11 billion working capital loans. I think the right figure now is Rs 8 billion. It is at a high level, no doubt. This has been done by the past management.

But I think the company can still be turned around. There is no doubt about that. The loans can be paid back.

The management has been saying that this debt of Rs 11 billion is going to be offset by the sale of the HCI (Hotel Corporation of India), Air-India's subsidiary. This is another issue we are questioning.

Why should the government sell off the HCI? Why not the strategic partner? Let the partner decide if he wants to take on this loan and keep the HCI as a separate profit-centre.

Today, the HCI is making a profit. Maybe it is a minuscule profit. Whatever it is, but it still is making a profit. So why sell that? Let the strategic partner decide how he wants to handle the finances. This is the liability of the airline, okay?

Today, the valuation of the company will perforce be lower because there is a debt of Rs 11 billion. The government wants to offset that debt. They can't put money from their side. So they say they will sell the HCI and put that money into Air-India so that the value of the airline goes up.

We feel this decision does not make business sense.

Capt Varma: Whoever comes in to the helm of Air-India has to sort out things like landing rights, dealer network, innovative travel products, domestic linkages, arrangements with airports. He has to go in for e-commerce or e-business which is not in place today.

The current management has not taken any initiative on this. All other airlines are already having a Net-based business; Air-India has not even started. We still depend on our agents to sell our tickets.

If you succeed in your bid, by when will you be able to turn around Air-India?

Capt Singh: We will be able to turn around the company in two years. If we gain control of Air-India in, say, 2001, the airline will become profitable by 2003.

We just have to increase aeroplanes, we have to improve our products, our image and motivate the employees. That is all that needs to be done.

Employees would also be investing in the airline. If the airline grows, their money grows too. The strategic partner will invest so much money that he is going to make sure the airline gets back on track as soon as possible. He is going to be there like a watchdog.

According to you, which is the best airline?

Capt Singh: Media reports say Singapore Airlines and Emirates are the best.

Capt Varma: Recently, I read in newspapers in Singapore that Singapore Airlines has got the best long haul airline prize and also the best airline prize instituted by the business media.

Capt Singh: Can we make Air-India as successful? There's no choice. When we talk of global competition, you have no choice but to match up or do better than your competitors, otherwise you cannot survive.


Interview with Divestment Minister Arun Shourie

Air-India told to cut flab

Branson's Virgin Airways seeks to rule Indian skies

Air-India floats global tender for leased aircraft

Air-India eyes small aircraft for fleet expansion

Columnist Dilip Thakore on Air-India's privatisation

Columnist Dilip Thakore on a Maharajah's sorry plight

Columnist Dilip Thakore on how netas, babus misuse Air-India


Official Web site of Air-India

Official site of the Ministry of Civil Aviation on the Net



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