In a recent report, CAG highlighted Air India’s wrongs and ways to get it right. Surprisingly, B&E’s analysis a few weeks earlier was fantastically similar!
The first was advocated by CAG too. “The main reasons for low route profitability were the liberal increase in bilateral entitlements, which benefited foreign carriers and the failures of AIL to contain losses (Paras 6.1.3.1 & 6.1.3.1.1). As regards erstwhile IAL: route economics revealed that most services were not meeting cash costs or total costs, both in domestic & international sectors (Para 6.1.2.1).”
As far as the second advice is concerned, CAG complained, “In our view, the potential benefits for the merger would have been far higher, had this been undertaken before finalization of the massive and separate fleet acquisition exercises undertaken by AIL and IAL (Para 4.1)... Substantially enhanced fleet acquisition, in fact, justified AIL to operate a larger number of routes. Even earlier, most routes were incurring losses, and only the Gulf/Middle East and Far East Asia routes made profits till 2005-06. By 2009-10, all routes were loss-making.” Of course, the report missed on the third advice on excess manpower, only adding, “The airline is in a crisis situation. Salary payments and ATF obligations are becoming difficult.” B&E had said: “A base of 6,727 employees is what it should ideally require; not a swelling paycheck for 32,000-odd!” and, “Over the years, AI’s management has blamed losses on escalating fuel prices or intense price wars. Not hard to disbelieve.”
CAG does, however, claim that its “examination was carried out in late 2010 and early 2011”. Trusting that, all one can conclude is that the date of the release was an incredible coincidence [before the CAG report was flashed across news channels, a new issue of B&E was already nearing twilight on the stands]. So is the fact that almost “all” issues covered in both the B&E story and the CAG report are common. There is a conspiracy theory though – 21 days is a long time and besides, B&E first informed the taxpayers about the closet full of skeletons. Taxpayer – now this is a word that had ZERO appearances in CAG’s report. Mr. CAG – we’re pumping our fists this time!
As far as the second advice is concerned, CAG complained, “In our view, the potential benefits for the merger would have been far higher, had this been undertaken before finalization of the massive and separate fleet acquisition exercises undertaken by AIL and IAL (Para 4.1)... Substantially enhanced fleet acquisition, in fact, justified AIL to operate a larger number of routes. Even earlier, most routes were incurring losses, and only the Gulf/Middle East and Far East Asia routes made profits till 2005-06. By 2009-10, all routes were loss-making.” Of course, the report missed on the third advice on excess manpower, only adding, “The airline is in a crisis situation. Salary payments and ATF obligations are becoming difficult.” B&E had said: “A base of 6,727 employees is what it should ideally require; not a swelling paycheck for 32,000-odd!” and, “Over the years, AI’s management has blamed losses on escalating fuel prices or intense price wars. Not hard to disbelieve.”
CAG does, however, claim that its “examination was carried out in late 2010 and early 2011”. Trusting that, all one can conclude is that the date of the release was an incredible coincidence [before the CAG report was flashed across news channels, a new issue of B&E was already nearing twilight on the stands]. So is the fact that almost “all” issues covered in both the B&E story and the CAG report are common. There is a conspiracy theory though – 21 days is a long time and besides, B&E first informed the taxpayers about the closet full of skeletons. Taxpayer – now this is a word that had ZERO appearances in CAG’s report. Mr. CAG – we’re pumping our fists this time!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
