Professional Documents
Culture Documents
Of
Organization Behaviour
Massive fleet acquisitions of Airbus and Boeing aircraft for nonexistent purposes were proposed, without any financial and commercial analyses that constitute mandatory processes for such huge purchases with public money. A decision to merge Air India and Indian Airlines into National Aviation Company of India (NACIL) was taken in 2007, without any ostensible reason and with ill-founded justification, duly assented to by the UPA government, leading to complete financial and operational breakdown. The amalgam of the two wings of the national airline was done hastily and defied the recommendations of several committees, without working out any solutions for the possible problems to be encountered. The vital issue of integrating human resources and flight operations still remains unattended. Revenues remained static, working capital loans and borrowings increased, liquidity decreased and losses increased all round. All that the merger has done is create innumerable personnel problems, with pilots getting different scales of pay for the same work, innumerable strikes; the airline has not yet been able to be part of the Star Alliance, which was its purported objective. Pilots belonging to the erstwhile Indian Airlines are disgruntled for not getting the same pay as their Air-India colleagues for doing identical work in the same organisation. Some top officials, including the expatriate chief operating officer Gustav Baldauf, have quit because of this. The report also clearly reveals that the oversight of the Ministry of Civil Aviation was highly inadequate, and if one dissects the sentences and words, there can be no doubt that its monitoring role was defective and conspiratorial. The management had by now fallen completely into the hands of politically handpicked bureaucrats, who toed the political line, gifting lucrative flights to private players, retaining the non remunerative ones, failing to take any measures to curtail losses, providing flying freebies to bureaucrats and airlines staff past and present, to keep them happy at the cost of the exchequer. Around 2006-2007, the airlines began showing signs of financial distress. The combined losses for Air India and Indian Airlines in 2006-07 were 770 crores (7.7
billion). After the merger of the airlines, this went up to 7,200 crores (72 billion) by March 2009 As on March 2011, Air India has accumulated a debt of Rs 42,570 cr (approximately $10 billion) and an operating loss of Rs 22,000 cr, and is seeking Rs 42,920 cr from the government. Salary payments and interest payments are being defaulted.
Q.1. Write a thematic Apperception of the above:After the merger the CAG, was unable to comprehend the rationale or justification of merging Air India and Indian Airlines into NACIL. The amalgam of the two wings of the national airline was done hastily and defied the recommendations of several committees, without working out any solutions for the possible problems to be encountered.
The vital issue of integrating human resources and flight operations still remains unattended. Revenues remained static, working capital loans and borrowings increased, liquidity decreased and losses increased all round. All that the merger has done is create innumerable personnel problems, with pilots getting different scales of pay for the same work, innumerable strikes; the airline has not yet been able to be part of the Star Alliance, which was its purported objective. Pilots belonging to the erstwhile Indian Airlines are disgruntled for not getting the same pay as their Air-India colleagues for doing identical work in the same organisation. Some top officials, including the expatriate chief operating officer Gustav Baldauf, have quit because of this.
small equity of Rs 325 cr, to be recouped through revenue generation (which of course never came, and therefore Air India`s bankruptcy today).
The cartoon depict the Maharaja of our national airline, which plunged from being the pride of our nation to complete penury, forever with a begging bowl before the government. The management decision of acquisition of a large and expensive fleet of aircraft when the market share of Air India was declining was clearly inflated, did not withstand audit scrutiny, was not based on market forecast or commercial viability, and was supply driven. Interestingly, the fleet acquisition was to be funded through debt and a small equity of Rs 325 cr, to be recouped through revenue generation (which of course never came, and therefore Air India`s bankruptcy today).
Around 2006-2007, the airlines began showing signs of financial distress. The combined losses for Air India and Indian Airlines in 2006-07 were 770 crores (7.7 billion). After the merger of the airlines, this went up to 7,200 crores (72 billion) by March 2009. As of March 2011, Air India has accumulated a debt of 42,570 crore (approximately $10 billion) and an operating loss of 22,000 crore, and is seeking 42,920 crore from the government. Due to high fuel and loan costs, Indian government pumped 32 billion into Air India since April 2009 and in March 2012 government bailed out Air India Ltd. with a 67.5 billion ($1.4 billion) As of May 2012 the carrier invited offers from banks to raise up $ 800 million via external commercial borrowing and bridge financing