AI crisis & governance

The current financial state of Air India has led to widespread speculation about the airline’s ability to survive. While diehard loyalists are hopeful that the government, in its capacity as 100% owner, will never allow it to go bust, independent industry analysts are not as optimistic and are in fact willing to set a timeframe up to which the national carrier can possibly survive, or be allowed to survive.

The government’s response to the crisis in Air India has been ill thought-out and grossly inadequate. The action initiated does not reflect the sense of urgency that is warranted. The recent appointment of four independent directors — Anand Mahindra, Amit Mitra, Air Chief Marshal Fali Major and Harsh Neotia —  is clearly a case of too little and too late.

How is the reconstituted board going to help Air India in its most critical period? Men of equal integrity, competence and proven track record have in the past been appointed on the boards of Air India and Indian Airlines. Did the government-owned airlines function any better during those periods as compared to years when it was packed exclusively by bureaucrats? Since the airlines have witnessed a gradual and sustained decline in service standards, market share, etc, over the years without showing signs of recovery, one should not expect too much from this exercise of appointing new directors.

A review of the recent past shows that eminent personalities from the private sector have been directors of one of the two airlines before their merger. Ajit Kerkar, the then head of the Taj Group of Hotels, industrialist Suresh Keswani, Inder Sharma of Sita Travels and actor Jaya Bachchan, to name a few, have been on the board of Air India at one time or the other. The national carriers have also had stalwarts like Ratan Tata, Rahul Bajaj and Russi Modi as chairmen. How much difference did their presence make to the fortunes of the two airlines?

In all fairness to them, one can state with a certain degree of authority that most of the time the civil aviation ministry has been engaged in backseat driving. Internal resistance to much needed changes has also compounded the problem. What is needed is not new members (with no offence intended to the new appointees) but good corporate governance. The board cannot have members with little or no understanding of the airline industry’s functioning and the ground realities that exist in Air India. It is one thing to take decisions that are deemed critical and imperative and another thing to ensure the implementation of such decisions.

How much independence will the newly-appointed members exercise for approving and rejecting proposals for the sake of the company’s well-being? One is tempted to raise this question because notwithstanding the pitiable financial state that the airline has been in for the past few years, decisions with enormous financial ramifications have been taken by the board, either voluntarily or under some compulsions thrust on them.

Good corporate governance at the board level should also ensure that calls from ministry officials or the minister himself are not entertained during board meetings for diktats on what decisions the board must take on key agenda matters. This disdainful practice of tendering last minute advice (read: order) has been on for almost two decades. Needless to say, intervention comes in most cases where someone else’s interests supersede that of the airline.

What will be of significance, therefore, will be to see how the new board members approach the present crisis. In the past, most members of the board have played roles which can be broadly classified into three categories. (a) Guided Air India’s destiny with active participation; (b) Been indifferent and attended meetings more as a ritual; and (c) Used Air India for benefiting their respective companies.

Needless to say, most private members, based on their performance, would see themselves classified in the last two categories as they have generally failed to make an impact that is expected of them. As the new members have been appointed at a time when Air India’s ability to survive is being questioned, it is only to be hoped that they will play a role, notwithstanding the infirmities in the system, which can help save the national carrier.

With time being the greatest factor, the four new members should play their parts fearlessly with the airline’s interest being the sole guiding force. Indians, particularly Air Indians, serving or retired, will watch their performance with keen interest because Air India is not just any company but has been an institution which in the yester years had evoked a lot of national pride. 

Here’s wishing the new members from the private sector all the best and hoping that they will reverse the historical trend which is heavily loaded against them and help steer the airline out of turbulence.