Air India: History reveals iconic rise but fall in wrong hands [Chronology]

One act of nationalisation and one act of privatisation later, it was a homecoming for Air India, airline that returned to its original founders -- the Tatas. But it's been much more than a roller coaster ride for the aviation entity, with ups as high as the literal sky and a fall as steep as the proverbial thud.

By 31st March 2020, Air India Limited was looking at accumulated losses of Rs 70,820 crore. Cut back to only 2000 and the company was still profitable. The first loss of Rs 57 crore was reported in 2001.  Fast forward to 2010-2011, the airline had turned in a loss of Rs 7,000 crore. It sure does take talent to mismanage an organisation to the point of such humungous losses compounding by the day.

Aviation sector experts and economists have come up with several explanations for the collapse of Air India and they pretty much overlap.

Major credit goes to bad management

From being a market leader for three decades with no competitor to lagging behind with losses, liabilities, debts, decreased revenues and on the verge of defaulting on its loans. This huge turnaround for the worse couldn't have happened without bad management decisions. In December 2005, the cabinet with then aviation minister Praful Patel, gave approval to the national carrier to buy 68 aircraft from Boeing Co. The decision to suddenly inflate its order of new fleet from 28 to 68 airplanes.

For this seemingly sudden decision, there was no route map for deploying those planes in place nor a revenue plan. Several political theories have been floated for this suddenly inflated order of the fleet. In his book, Not Just an Accountant, ex-CAG Vinod Rai writes that Air India's board of directors had originally placed an order for 10 Airbus (A330) aircraft.

But this order was later changed to Boeing and the order size increased from 10 to 111 aircraft. Air India's policy of deploying fuel guzzling B747s on some of its domestic routes added to the operating costs and consequently to incur huge losses.

In short with unwise purchases and unjustified ad spends, an airline was being forced to take on a debt of more than six times its revenues. With revenues of Rs 7,000 crore, it took on a debt of Rs 50,000 crore.

The year 2007 also saw huge advertising budgets by all the airlines. This was the era when airlines advertising wasn't restricted to just new flight announcements, but all-out event-based advertising budgets. Air India, already beleaguered with debts, also allotted a maximum percentage of its expenditure on outdoor activities, like festivals, marathons, cultural activities and sponsorship of events. In the long run, that did little good.

The merger that didn't help

The combined company, which came into being after the merger of Air India and Indian Airlines in 2006-2007, also continued to undergo losses. In 2007, Air India's losses were to the tune of over Rs 541 crores and Indian Airlines' worth Rs 230.47 crores.

Both public sector units continued after the merger without any employee layoffs. In 2009, Minister Praful Patel finally announced that Air India's borrowings rose from ₹6,550 crore in November 2007 to ₹15,241 crore in June 2009.

Poor human resource management

Hiring, training and retaining of employees became subject to poor and faulty human resource practices. After the merger of Air India and Indian Airlines, instead of laying off employees, the salary expenses increased. Pilots went on strike demanding fair wages. The revenue losses because of the strike also piled onto the expenses. The vicious circle of debt, decreased revenue from passengers, more competition had already set in.

Untrained cabin crew and unionised employees didn't help with the image of the carrier. Many in-house members even blame the faulty and biased recruitment process as a result of which in-flight standards kept decreasing. After all, with Air India being a government company, the ultimate decision making was left to bureaucrats and government who had next to nil experience or knowledge of the industry.

Bad routes vs lucrative routes

Lucrative routes and direct non-stop flights are half the battle won for any international or domestic carrier. Air India seemed to have lost this battle of lucrative routes. For which, several officials in the industry, pass the buck to Praful Patel. So much so that a Tehelka report even quotes Capt Mohan Ranganathan, as saying that the airline handed over, "flying rights on lucrative sectors in the Gulf to foreign airlines, including Etihaad Airways, Qatar Airways, Air Asian Singapore Airlines etc."

Whatever little new routes were opened up for Air India were not commercially viable. Before Air India Express finally realised this and started offering direct flights to the Middle East, it was too late. Talking of Air India Express (which started its commercial operations in 2005) the carrier's fleet configuration became more complex after it ordered 18 Boeing 737s for Air India Express. Adding these fuel-guzzling aircraft for short-haul flights added to its operation and inventory costs.

The decision to finally sell it off

In the March of 2018, GoI invites expression of interest from investors for buying a 76% stake in Air India, with the remaining 26 per cent to be with the government. The original offer included 100 per cent in Air India Express and 50 per cent in ground handling arm AISATS. However, with the buyer required to take on the debt of Rs 33,392 crores, it is no wonder that no bids were received for India.

Will Air India truly come a full circle?

In 1953 Indian government decided to nationalise Air India and it was in 2017 that the government decided to privatise Air India. Air India, the national carrier is finally sold back to Tata group reportedly for ₹18,000 crore and with an aircraft debt of ₹15,300 crore. The government keeps a sum of ₹2,750 crore in cash and also a debt of ₹61,000 crore that will be transferred to another entity.

Across the world, there is no definite blue-print for running a successful airline. Often, it is about top management in great form, good economic decisions and offering customer experience. Among the top of the line international carriers, both private, public and government-owned airlines make the cut. From Singapore Airlines and Lufthansa to Etihad and Emirates are a few to name.