Turbulance in the Indian Aviation Sector.

Indian aviation saw a sea change in the 90s when private airlines were allowed to enter and quickly challenge the dominance of the National carrier – Air India.

Air India has not been in profits for a very long time,and has been generously supported by the taxpayer.But frankly who cares? when the shareholders (Taxpayers) have no real control and politicians have political considerations to meet, including giving free first class tickets to themselves and keeping the staff and its unions happy, thanks to a vociferous and boisterous staff having a political connected Union funding a Political party generously and least consideration about the customers they serve.
If u look at Air India’s service standards you will understand what i am saying.

Maharaja in a Maha Mess

Airlinequality reviews Reviewcentre reviews

How AirIndia treats unaccompanied minors

The Govt didn’t mind taking a hit, it could get more taxes in terms of surcharges and taxes on ATF, The states were happier because they could charge sales tax over and above the central taxes.

As Private airlines took over market share the politicians did make noises and give lip service to the sad state of the National carrier. Air India never releases its balance sheet regularly, and most often it is released when there are profits. Last one released was for yr 2005/06 when it made a 940 crore profit. There were on and off attempts to take Air India public or induct a partner but most of them failed as Air India had a lot of problems and monopoly baggage.  Read Bidders question A-I balance sheet.

BBC 2001: The airline’s true worth does not lie in its 25 aircraft, or even in its 18,000-strong workforce, which at more than 700 workers per plane is double the industry standard. Job losses are expected after the sell-off.
Investors will not be impressed by the company’s bottom line either, given that Air India has lost money for seven years and has amassed 38bn rupees in debt.

Pie chart from wiki

The private carriers flourished in the boom days , thanks to better and timely service and price wars. After consolidation and mergers, two groups emerged as major players. Jet Airways chaired by the low profile Naresh Goyal and Kingfisher managed by the flamboyant Vijay Mallya.

Jet has been in the news before as people have questioned about its Chairmans contacts and his source of funds.

Read : 6 questions to ask before buying Jet’s IPO

Tail Winds, registered in the Isle of Man, Mauritius, owns 99.99% in Jet Airways. The rest is owned by a number of shell companies.

Read Tehelka’s Networked Operations and  Clear Air Turbulance

Tail Winds Limited is a company incorporated in the Isle of Man (Company No.56352c), with a paid-up capital if US$ 20 million in 1994. Besides Goyal, the Board of Directors as on November 30, 2004, consisted of Peter Lal, a Singaporean business consultant, Ali Ghandour, a Jordanian international aviation consultant, Jehangir Rustam Gagrat, an Indian solicitor and Victoriano Posadas Dungca, an American business consultant.

Goyal’s enterprise has been repeatedly linked to the underworld, to blackballed names like Dawood Ibrahim and Chhota Shakeel in particular. The Patiala-born entrepreneur who chose to turn an NRI in 1991 — just before Jet Airways took off — finds mention in sensitive Home Ministry files. One reference says he has been a “steady recipient of large dubious investments originating from Gulf Sheikhs”.

Naresh Goyal’s name, in fact, figures in the top secret files of agencies few would like to be seen in. Scores of questions pertaining to his sources of funding have been asked in Parliament. According to India’s external intelligence agency, raw, “There is strong suspicion that part of Goyal’s investments may have accrued through the assistance of underworld groups, prominently headed by Dawood and Chhota Shakeel.” He has also gone down in the records of the Intelligence Bureau. In 2001, when the Ministry of Civil Aviation asked the Home Ministry for a security clearance because Jet Airways was adding new members to its Board of Directors, Joint Director Anjan Ghosh sent damaging inputs to Sangita Goirala, a joint secretary in the Home Ministry. Ghosh’s secret communique said, “We have confirmed information of intermittent contacts between Naresh Goyal and underworld dons, Chhota Shakeel and Dawood Ibrahim, to settle financial issues. There is strong suspicion that parts of Goyal’s investments may have accrued through the assistance of underworld groups…”

HT Notice issued to Jet Airways’ Chairman for alleged underworld nexus
When ATF prices rose, and the world economy saw a downturn, liquidity got tightened and the losses mounted, Air India management went silent and the Aviation Minister did what he knows best – He demanded a bailout package for the private airlines.

On the other hand the Private carriers saw liquidity and funding vanish when everyone realized that there are a few years still for the Airlines to break even and make profits and started tightening their belts, selling air crafts, and making an unheard of alliance between both dominant players.

Recently Jet announced that it retrenched staff. MNS and the labor ministry jumped in, and the whole thing got political color. It was interesting to see white skinned, glares wearing air hostesses protest with political workers they sometimes detest.

Image Hindu

The news that AI plans temporary layoff of 15,000 staff also came out ( Showing how bad the situation had gotten)

Today a moist eyed emotional Naresh Goel did an about turn and came out and took back the fired employees, and talked about Family (reminding me about the late Dhirubahi Ambani), and about him taking the decision with no political pressure, even denying that he was in the loop when specific decisions were taken by the management (Reminds me of the classic – What a difference a day makes).

But as Saa Rukh Kaan says ‘Ab picture to baki hai mere dost ‘ Expect the truth behind this will hopefully unfold in the near future.

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About Prax

I blog , I trek , I make mistakes... After all im human.
This entry was posted in India, Life, Mumbai, news, Random Thoughts, Reflections and tagged , , , . Bookmark the permalink.

5 Responses to Turbulance in the Indian Aviation Sector.

  1. Amit says:

    I cannot understand that if there wasn’t a problem then why were the employees sacked in the first place?
    If they could take them back, then there was no need to throw them out.
    Something fishy I tell you!

  2. Nikhil says:

    It’s such a farcical situation, isnt it? Looks more like a publicity stunt that went horribly wrong! :D

  3. xylene says:

    Something fishy? Yes !
    But going to Raj Thackeray for help was the worst thing they could do for themselves.

  4. Pingback: Why Indian PSUs dont succeed ! « Tech and Trek

  5. Excellent site, keep up the good work

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