Hare-Brained Strategy - Air India May Replace Team Which Plotted Its Turnaround - Firstpost

Hare-brained strategy? Air India may replace team which plotted its turna...
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Hare-brained strategy? Air India may replace team

which plotted its turnaround
Sindhu Bhattacharya (http://www.firstpost.com/author/sindhu) Jun 10, 2016 10:53 IST
#A Gajapathi Raju (http://www.firstpost.com/tag/a-gajapathi-raju) #AI (http://www.firstpost.com
/tag/ai) #air india (http://www.firstpost.com/tag/air-india) #Anand Mahindra
(http://www.firstpost.com/tag/anand-mahindra) #Civil Aviation Ministry (http://www.firstpost.com
/tag/civil-aviation-ministry) #Independent Directors (http://www.firstpost.com/tag/independentdirectors) #oil prices (http://www.firstpost.com/tag/oil-prices) #operating profit
(http://www.firstpost.com/tag/operating-profit) #Privatisation (http://www.firstpost.com
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New Delhi: The government is looking to appoint an entirely new set of independent
directors on the board of Air India. The five current independent directors finished
their three-year stint last month and according to airline officials, none may be
re-appointed. Much of the push to restructure loss making routes of Air India over the
last three years, it is believed, came from these five independent directors. The five
worthies have also kept up the pressure on the airlines management to analyse and
improve the cost economics of each route, regularly monitoring progress on this front.
Last year, the quintet also risked all-round displeasure by boldly suggesting that the
airlines privatization or offloading of strategic stake by the government be given some
serious thought. They had presented a proposal before the Minister of Civil Aviation, A
Gajapathi Raju, but received no commitment on the issue.
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It is clear that Raju does not believe in privatisation of Air India. In a candid chat with
agencies, the minister has admitted that the airlines books are so bad that there is no
chance of any interested party coming forward to participate in the airlines equity. As
for the independent directors push for profitable routes, the massive overseas
expansion that Air India has embarked upon in recent months without any in-depth
study on route (http://economictimes.indiatimes.com/industry/transportation
/airlines-/-aviation/air-india-cant-get-public-money-for-eternity-ashok-gajapathi-
/sports/why-ms-dhonis-first-bilateral-seriesagainst-zimbabwe-is-crucial-for-himas-captain2826342.html?utm_source=fp_top_internal)
Why MS Dhonis first
bilateral series against
Zimbabwe is crucial for
6/11/2016 7:34 PM
2 of 5
raju/articleshow
/52671894.cms) economics
shows scant regard for the
views of these directors. San
Francisco, Vienna will soon be
followed by one new
him as captain
/sports/why-ms-dhonisfirst-bilateral-seriesagainst-zimbabweis-crucial-for-himas-captain2826342.html?utm_source=fp_top_internal)
destination each in the United

States and UK and Spain. The
recent move by the airlines

management, to go for
(http://s4.firstpost.in/wp-content/uploads/2016/04
massive fleet expansion,
PTI
/Air-India_PTI.jpg)
where it is considering an
addition of 100 aircraft in the
next few years, is also raising hackles of some airline officials who question the need for
such an expansion in the absence of a clear roadmap.
So what has irked the government more the belief of these directors that government
needs to lessen its control over the workings of the loss laden airline by divesting some
stake, or their constant push for improved route economics? It is true that Air India
/world/modi-in-us-magic-of-modinamathe-answer-to-indias-long-wait-for-a-globalleader2825516.html?utm_source=fp_top_internal)
Modi in US: Magic of
Modinama, the answer to
India's wait for a global
leader
/world/modi-in-usmagic-of-modinamathe-answer-to-indiaslong-wait-for-a-globalleader2825516.html?utm_source=fp_top_internal)
reported Rs 8 crore in operational profit for the first time in a decade last fiscal. This is
not only a record of sorts but also an improvement over targets it had set itself in the
Turnaround Plan, under which AI is guaranteed over Rs 30,000 crore equity support
from the government in a 10-year period.
Though benign oil prices have helped the airlines profitability to a large extent, the
restructuring of non-profitable routes and some other cost saving measures being
supervised by the independent directors have also helped. Remember, it is under their
watch that the airline actually managed to show any profit at all the Rs 8 crore figure
is operational profit and unaudited as of now. With these directors moving out, will
equal emphasis on route economics remain, is the key question.
The outgoing independent directors on the board of Air India are: former Procter &
Gamble India chief and writer Gurcharan Das; IIM Ahmedabad professor Ravindra H
Dholakia, retired Air Marshal K.K. Nohwar (former vice-chief of the Indian Air Force);
/politics/modis-obstacles-come-fromhotheads-belonging-to-his-ideologynot-political-rivals2825348.html?utm_source=fp_top_internal)
Modi's obstacles come
from hotheads belonging
to his ideology, not
political rivals
/politics/modisobstacles-come-fromhotheads-belongingto-his-ideologynot-political-rivals2825348.html?utm_source=fp_top_internal)
banker Renuka Ramnath and founder director of IIT Roorkee, Prem Vrat. Gargi Kaul
and B S Bhullar are the two government nominees on the airlines board. Other
directors are CMD Ashwani Lohani, Director Finance V Hejmadi, Director Personnel N
K Jain and Director Commercial Pankaj Srivastava.
Names of new appointees are not official as of now. But among the contenders are well
known people from the world of banking (a renowned lady banker heading one of the
largest public sector banks and a veteran banker credited with setting up one of Indias
largest private banks). Also, retired bureaucrats and a travel industry professional who is believed to be close to a minister in the NDA government - seem to be on the list.
Is this medley of people good enough to secure Air Indias future?
/business/narendra-modi-raghuram-rajanrbi-subramanian-swamy2825854.html?utm_source=fp_top_internal)
Salvo Swamy: BJP leader
says Rajan planted 'time
bomb' to wreck economy
/business/narendramodi-raghuram-rajanrbi-subramanian-swamy2825854.html?utm_source=fp_top_internal)
As per this story in Business Standard, one of the outgoing independent directors
(http://www.business-standard.com/article/companies/new-ai-independent-directorhopes-to-change-work-culture-113052800914_1.html), IIM Professor Ravindra H
Dholakia had said earlier that the airlines employees need to change their work culture
and outlook. Dholakia was also a member of the Dharmadhikari committee which was
(http://www.fakingnews.firstpost.com)
set up to complete the HR integration of the erstwhile Air India and Indian Airlines.
With an emphasis, rightfully, on lessening loss making routes and a push for
privatization of Air India, did the independent directors chart out a course which was
far too independent for the governments liking? Around March last year, they had
taken an earlier proposal on privatisaton to Civil Aviation Minister A Gajapathi Raju.
It seems these independent directors had suggested that the process of privatization
may be started with two businesses which were earlier spun off from the airline engineering and ground handling. Air India Express could also be considered under
this scheme. In a board meeting of Air India in March last year, one independent
director who is a strong votary of privatisation asked about the financial performance
of Air India Air Transport Services Ltd (the ground handling subsidiary) and also about
the Air India Engineering Services Ltd (the engineering subsidiary). This director said
the process of disinvestment could begin with these two companies even though a
third, Air India Express, could also be considered since it has been making operational
profits since FY14.
(http://www.fakingnews.firstpost.com
/2016/05/amusement-park-to-open-anescalator-ride-for-people-who-keepriding-them-forfun/?utm_source=fp_cat_widget)
Amusement park to open an
escalator ride for people who
keep riding them for fun
/2016/05/amusement-park-toopen-an-escalator-ride-for-
6/11/2016 7:34 PM
3 of 5
Air Indias independent directors have never really had a say in the airlines
management. In 2010, the then Civil Aviation Minister Praful Patel had brought in well
known names such as M&M chief Anand Mahindra, Ficcis Amit Mitra, Ambuja Realtys
Harshvardhan Neotia, Dubai based industrialist Yusuff Ali and former Air Force Chief
Fali H Major. But these directors faced enough hurdles during the subsequent board
meetings to finally resign from their positions within one year.
As per this story (http://www.hindustantimes.com/india/air-india-brass-under-
people-who-keep-ridingthem-forfun/?utm_source=fp_cat_widget)
Unable to complete
elevator pitch with VC
in 60 seconds,
entrepreneur presses
random buttons in lift
/2016/06/unable-
fire/story-CyQLapQV2iR7pugFIcc4rI.html), the directors had complained to Patels

successor Vayalar Ravi about the work culture at the airline, its on-time performance
and other issues.
This time, as the government again sets out to install independent directors on the Air
Indias board, it should keep in mind that getting professionals who have been
turnaround specialists, people with cost management skills and those who genuinely
want to improve Air Indias future should be inducted. Else, Air Indias books will
remain bad for many more years despite its operational performance improving.
37
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6 Comments
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chandu
DIS QUS
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6 hours ago
Modi Ji Govt can appoint Satyam Raju as director to bring Air India to growth path
just like they brought India's economy to growth path by changing GDP calculation
itself
Reply Share
Naveen Dighe
a day ago
AIR INDIA A WHITE ELEPHANT HAS ALWAYS BEING THE FIEFDOM OF THE
POLITICIAN BUREAUCRAT AND DOZEN,S OF TRADE UNION LEADERS
TONNES OF TAX PAYERS MONEY HAS BEING PUMPED BY THE LAST GOVT
THIS GOVT ALSO SEEMS TO BE DOING THE SAME
Reply Share
S M Krishnan
a day ago
A typical article with out any substance. May be a part of lobbying for the people who
are already on board. Who would like to fore go free bees that come along with a
board position ?
Reply Share
1
Sphinx
a day ago
There is no problem in changing the directors in any company, unless the intention is
to go back to ministry control & bringing bureaucracy back.
CEO or Director of any listed company/ PSU should not be for life-long.
But here they should have retained one or two directors for some continuity.
Reply Share
Am A
a day ago
if the 2 yr has shows us is that... the govt is BIG on talks, and LESS on action.
Prior to elections the BJP party used to boost how they change business is done,
and weed out inefficiencies like Air India. Instead is seems it is going in the opposite
direction; bringing in more inefficiencies by retaining more govt control.
Of course all it's talks privatization are zilch when it doesn't have the political will to
deal with unions and the likes!!!
Reply Share
plain truth
a day ago
All that "minimum government" talk was yet another jumla. Hare-brained would
explain many of this govt's strategies.
Reply Share
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Hare-brained strategy? Air India may replace team

'Te3n' review: Amitabh

destination each in the United

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fire/story-CyQLapQV2iR7pugFIcc4rI.html), the directors had complained to Patels

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