PERFORM or Perish – that was the threat given by the minister of civil aviation to the employees of National Aviation Company of India Limited (NACIL), the merged entity of Indian Airlines (IA) and Air India (AI) last month. This threat came in the background of the sudden stoppage of monthly wages of the employees for the month of June on the plea of resource crunch, or more correctly, due to lack of working capital. Simultaneously there was a big hue and cry in the media with selective leaks from the ministry that Air India (the brand name of the new entity NACIL) is running on huge losses. The estimates varied from Rs 7000 crore to Rs 5000 crore. The huge workforce with figures ranging from 35,000 to 50,000 was highlighted as a major threat to survival of Air India as an entity. This workforce has to behave –– that was the sermon from the ministry and corporate media, which in most uncertain terms meant that the workforce has to be drastically reduced, the workforce should accept wage cuts, delayed wages, etc.
FACTS AND THE FICTION
During the first tenure of the UPA government, the combined net profit of Indian Airlines and Air India was Rs 162.44 crore in 2004-2005 and Rs 64.94 crore in 2005-2006 (Public Enterprise Survey2006-2007, Volume II). The combined manpower was 33,547 which has now come down to 32,287 as on March 31, 2008. It was in 2006-2007 that both the airlines suffered losses of Rs 668 crore(provisional). But why? This is what the parliamentary standing committee on civil aviation was informed as per the 138th Report of the Committee on Demands for Grants (2008-2009) of Ministry of Civil Aviation, placed in parliament on April 28, 2008.
“The committee was informed by the ministry that the erstwhile Air India had suffered a provisional net loss (after tax) of Rs 447.93crore during the year 2006-07 as against a net profit of Rs 14.94crore for the year 2005-06. The ministry in its reply to the query on the reasons for the loss has stated that this is due to settlement of wage arrears to the tune of Rs 425 crore, decrease in load factor and fall in yield due to competition. The ministry has also informed that the passenger load factor has declined from 66.2 per cent to 63.8 per cent for the year 2006-07″
“The committee was further informed by the ministry that the erstwhile Indian Airlines Limited had suffered a provisional net loss (after tax) of Rs 240.29 crore during the year 2006-07 as against a net profit of Rs 49.50 crore for the year 2005-06. The ministry in its reply to the query on the reasons for the loss has stated that the varied price of ATF is one of the main causes for the loss. The ministry also replied that on the revenue front also airlines continued to be hit by rapidly declining passenger revenue yields on account of intense competition and deployment of excess capacity in the market. Further, the bottom line of the company was affected due to the writing off of the entire amount due from its subsidiary company Airlines Allied Services Limited (AASL). However, the passenger load factor has increased from 71.6 per cent to 73.1 per cent for the year 2006-07.”
The amount written off from AASL was Rs 295 crore. Therefore, the wage arrears of Rs 425 crore and amount of Rs 295 crore together amounts to Rs 710 crore which is more than the combined loss of Rs 668 crore for Indian Airlines and Air India. This meant that there was no operating loss even after tax for the year 2006-2007. The overall reduction of load factor of both the airlines together was 0.9 per cent only. Amusingly, the ministry attribute varied fuel costs as one of the reasons for the losses of Indian Airlines. However, the same reason was not attributed for the losses of Air India. The committee was also informed that the purchase of new aircrafts by Air India will have very positive impact in its operations. As per the ministry’s annual report for 2007-2008, Air India had signed an agreement for purchasing 68 aircrafts at a cost of $11 billion and a loan of $7.2 billion was cleared by EXIM Bank of USA on October 9, 2006. Subsequently the order for acquiring 43 more aircraft was also cleared.
The above facts (and not fiction) were in public domain till April 2008. Was there any “doomsday” projection whether on over staffing or bankruptcy of merged Air India till that day?
