Turning Air India around

Earlier this year, it was reported that potential bidders for AI would have to take on ₹23,286 crore worth of debt (much less than the airline’s overall debt overhang of over ₹62,000 crore). But, now, various reports suggest that the government is allowing bidders to determine themselves how much of the airline’s debt they would like to take on—by accepting bids on the basis of the airline’s enterprise value (equity + debt).

“Offer a zero debt AI to the highest bidder in an open auction instead of sealed cover,” argues Captain G.R.Gopinath, founder of erstwhile budget airline Air Deccan. “Because now debt is linked to asset value, and asset value and contracts are suspect.” Furthermore, he believes that the successful bidder must be given the right to retain employees whom they want. “For the rest, government has to give VRS (voluntary retirement scheme).” Despite all these challenges in acquiring AI, Gopinath labels it as being “a worthy” challenge.

Kapoor, who has first hand knowledge of how SpiceJet turned around from the brink of collapse in 2014, says the kind of transformational turnaround that is required for AI is not easy nor is it cheap. “They will need visible and inspirational leadership, as opposed to faceless bureaucrats and technocrats who are typically unable to inspire, motivate, and drive culture change,” adds Kapoor. He insists that AI cannot be turned around on “sentiment” and “good intentions” alone.

If the Tata group were to come up as the winners in the bid for AI, would the group then operate three separate airline entities or merger two or all of them? Gopinath says that they should merge all their aviation ventures under one entity, “and call it Air India.” He goes on to explain that all domestic operations of the merged entity should operate on the lines of a budget airline, while international operations could be run on a full-service model—offering business class seats, and other passenger comforts, and perks. “Domestic [operations] must be run like IndiGo or better, Air Deccan,” says Gopinath, “and International like Singapore Airlines.”

Easier said than done, especially when airline mergers in India have been a disaster. And the examples are plenty, be it Air India and Indian Airlines, Jet Airways and Air Sahara, or Kingfisher Airlines, and Gopinath’s own Air Deccan.

Air Deccan

Tata-Air India: Too much to chew

Runway success

Runway Rush

In Gopi we trust