PMO against IC AI merger. - Airliners-India

COUGAR · Member

RE: PMO against IC AI merger.

COUGAR · Member

[QUoTE] don't doubt the calibre of Wharton but IA against AI, no way in a million years. Been there, seen it, read the book and watched the movie. IA is a good airline staffed by caring and nice folks.

Dont quite understand ur point here. What exactly makes AI better than IC? Better management? better service?

Lets put this belief against hard facts: On Time performance of AI vs IC. This despite the fact that IC operates a much older fleet to a much more wider network than AI, including to stations that dont have proper passenger facilities. Winner: IC.

Profitablity: What were the profits declared last year? And the year before that? And the year before THAT? And how does it compare to IC's record? Govt employees still HAVE to travel AI when they go international: a substantial captive market. But the restriction on domestic travel has been lifted and govt employees can now take other airlines. Inspite of all these restrictions, IC has been the ONLY airline in India to make profits year after year. I attribute this to good management as compared to the bunch of foolish mallus and bawas running Air India.

As for service: apart from a rajnikant film screened on a scratched cabin screen, how exactly is AI service different from IC ona route where both operate (MAA-SIN)? Both have liquor service: IC does it from minis, never tried AI but are they different? AFAIK, they have the SAME caterer and use the same Hotel for their crew!!

tayara mechanici · Member

COUGAR wrote:

tayara mechanici wrote:

No 'F'ing airline in the world can create a brand like the Maharaja and livery like AIs Rajasthani windows. We can debate on how well this brand has been positioned post 1977 but to even consider IA to be superior brand is a compliment to IA in the least and wishfull thinking mostly.

But decisions like merger etc are strictly business where there is no room for sentimentality.

Cougar, Firstly the biggest assets of any airline is their routes, secondly the infrastructure i.e. Gates, Terminals, Hangars etc and third Brand on all of these counts AI has a better value. Regards the turning around of IA

1) They have more gates and parking slots than they require, leading to renting the excess facilities i.e. Terminal 1B BOM.

2) 80% of their routes are domestic resulting in cross subsidies from all the other GOI owned est i.e. IOC, AAI, GIC etc. The head of IA doesn't have to worry about finance. The milking routes to Gulf i.e. SHJ has little or no competition.

3) It was only in Feb this year that the GOI has allowed all employees to travel by any dom airline. However if i am not mistaken the MPs still get their yearly 12 tiks on IA. There are many such state grants that IA get in excess of AI.

AI does not lack the skills and the management is far better, i do believe and have had first hand experience myself of the rot spreading thru AI ( My wife was travelling with our 1yrs old daughter LHR-BOM, was denied the bassinet seat which was filled with fat cat businessmen and she had to lay the child on the floor as she had her meal which was again not the one ordered pre-flt, additionally the hostie had a go at her.....bloody NRI) and vowed never to travel by that airline. The reason the airline is in the present state is because GOI has been flirting with the idea of pvt AI since 1993. During the last round of pvt the bidders for AI incl LN Mittal, Hindujas and Ambani, subsequently it was TATAs with SQ, . In all this while the GOI ignored AI simply because it was stronger of the 2 AI/IA. The previous MD Mr Gogoi, a very unassuming engineer had taken some very wise decision which saw the airline consolidate its position and also expand. Tulsidasan is following on the business plan layed out by Gogoi. Most of the employees incl Pilots and AMEs hated him for his management style, Gogoi was effective in discplining these 2 pamered lot. Regards the exp of my wife and inflt svc, thanks to the Shiv sena union you have the andu-pandu ga... attitude in the cabin now.

Anyway, the point i am raising is that AI has it in and given the right independence and backing will see the brand regain its rightfull place in the world of aviation. Even if you had to offer IA a monopoly with ownership transferred to say a M Ambani, it will always come a poor second to the AI of the 1960s, a glorious past that can be easily restored.

The fact that the LNMs, Hindujas and Ambanis of India, crave to own AI is recognition of the brand value and its inherent potential. How many leading businesses have come fwd till date to takeover IA ? Videocon

AKLDELNonstop · Member

TM,

I wouldnt put it as brand value at the moment, but a glorious past and a future potential brand value. But when it comes to service IA at the moment is far superior.

Although I totally agree with you that people crave to buy AI and put it back to its rightful position, however this isnt going to happen easily and not anytime soon, GOI and the unions will ensure that. Even of someone did buy it, the staff attitude including that of the management is so indifferent that changing the attitudes of the current staff is going to be close to impossible, the only option I see is replacing those staff which is not really an option.

As far as their management is considered TMji can u pleas explain this? AI decides to go for world class seats and interiors on their new in coming a/c, decide to completely re do Y in their owned 744s yet they do not change their ratty old F in 744s.

Cheers

JumboJet · Member

IMO AI and IC merger can take on global giants.

Guess, inhouse fighting in our country never let it grow big, here is our chance. So let us put our heads together and make this deal get through.

If we win, we have a global brand emerging to its new dawn, if we loose we can all sit back and throw muck at each other like we have always been doing.

Shape up or ship out guys.

Get real.

We are Indians not just Air Indians or Indian Airliners.......Mera Bharat Mahan remember

himmat01 · Member

As far as their management is considered TMji can u pleas explain this? AI decides to go for world class seats and interiors on their new in coming a/c, decide to completely re do Y in their owned 744s yet they do not change their ratty old F in 744s.

They re did their F and J class seats 2 years back with seats which were already outdated by that time.

tayara mechanici · Member

himmat01 wrote:

As far as their management is considered TMji can u pleas explain this? AI decides to go for world class seats and interiors on their new in coming a/c, decide to completely re do Y in their owned 744s yet they do not change their ratty old F in 744s.

They re did their F and J class seats 2 years back with seats which were already outdated by that time.

Arre yaar exactly the same reason why the rot has set it, every Ministers, Babus or MD is only thinking of milking the cow for his short term gains. The refurb or many other trivial projects are for these coterie to make money.

The brand has got value, we can keep debating about present, past or future. To give an example BMW brought ROVERS in U.K. They turned around the mini Brand because of its inherent value, extracted the technology off the Range Rover brand and let it wither and sold the Rover tag.

You can sell off AIs routes and Infrastructure but keep the name, mascot and logos with the livery it will still fetch you a premium, the brand is iconic. This is where i am coming from. The service and management will follow once under appropriate ownership.

COUGAR · Member

1) They have more gates and parking slots than they require, leading to renting the excess facilities i.e. Terminal 1B BOM -

- Applies to Air India more than IC. Air India also makes a packet from leasing out facilities and providing ground services to airlines like SQ, CX etc. Infact the moolah involved here is more. MUCH MUCH MORE.

2) 80% of their routes are domestic resulting in cross subsidies from all the other GOI owned est i.e. IOC, AAI, GIC etc. The head of IA doesn't have to worry about finance. The milking routes to Gulf i.e. SHJ has little or no competition.

- Bullshit. IOC, AAI, GIC etc all charge IC the full amount. Infact they charge a premium becuase the Airlines are considered a premium market. And being state-owned IC doest have the freedom of "playing the field" as pvt airlines would do. Infact Sales Taxes imposed by some states makes many domestic flights unprofitable. Here again Air India is allowed to hedge its fuel requirements upto a certain quota to protect itself from fuel price increases. IC doesnt get this privilege.

3) It was only in Feb this year that the GOI has allowed all employees to travel by any dom airline. However if i am not mistaken the MPs still get their yearly 12 tiks on IA. There are many such state grants that IA get in excess of AI.

- There are a total of 545 MP's who get this privilege. You must agree that 12x545 isnt a lot in erms of subsidy.

As things stand the ONLY subsidy that IC receives (which is available to other pvt carriers as well) is exemption of Taxes.

Air India not only gets more direct and indirect assistance its managers have also twisted the law by misusing the Bilaterals. AI has been making quite packet by leasing out bilaterals to other airlines like Austrian. This moey should actually be going to the Govt sice the Govt owns the bilaterals NOT AI!! Inspite of all this, AI is still leaking money. Hmmm. Piss poor maintenance standards, extremely unprofessional management and staff, piss poor service and an appalling on time record. Hmmm! Still think they make for good value? I wonder how and why the govt is keeping this national shame flying. I say ground this national shame, sell off its loss making assets or transfer them to IC which can do a much better job in this role.

Tayara: You may have an emotional attachment towards AI. But there is no place for emotions in business. AI's brand value in the 60's has no relevance today when IC commands a much better brand value and indeed market value. IC management is exuding a not-too-silent confidence over the upcoming IPO while AI mgmt is running scared. Bcoz they know deep dpwn that the market value of IC is rated much higher than them!! Whatever their brand value may have been in the 60's, AI stock is worthless today except for use as wallpaper!!

IC shares on the other hand can actually command a premium. Again dont believe me: ask a stock broker which scrip interests him more!! Becoz the market sees the facts not emotions. They see a perenially loss making airline against another consistently profit making airline. IC has after all made profits and declared dividends even at a time when ALL Indian carriers including AI, 9W and DN have been making losses. Its service is fast becoming top-notch and on-time performance is much ahead of 9W and OS. AI doesnt even count as far as service or on-time performance is concerned.

Yet people want a profit making, service oriented airline to merged with a loss-making airline and retain the brand and mgmt of the lossy airline? Strange!!

tayara mechanici · Member

COUGAR wrote:

Tayara: You may have an emotional attachment towards AI.

You may be correct to a certain extent regards my bias towards AI. I accept all your assertions about the state of Ops, Maint and Inflt svc within AI however at the same time IA does not shine exceedingly on any of these counts. The lack of management experience within the ranks of IA was exposed during this summer when they had a third of their fleet grounded due to maintenance. The reason given was the GOI is not releasing funds, to put it in your language IA still needs to tug at the GOIs coat tails or is it pallu for its survival. And to make sure they get a favourable treatment they give a free ride to 545 law makers of this country and then go around harping about their excellent turnaround.

Checkout Gopinaths latest statement on IAs undercutting on major routes by 50%, simply because they have are state owned if things go in red doesn't matter the GOI will bail it out, as has been YOY.

Never considered IA to be worthy of being in this business, inspite of having a monopoly in the domestic aviation, it was only after the likes of DN entered the market that we saw real growth in the dom Indian aviation.

COUGAR · Member

We are talking relative quality here Tayara!!

As of today, IC is far far ahead of AI in all these areas. And I have personally seen them working hard to get things done: from lower level staff to people higher up the ladder. In sharp contrast to the lazy mix Mallu/Parsi a***holes in the Kalina office of Air India!!

So why destroy a brand that has so many people working hard and merge it into a shitty airline like Air India filled with shameless a***holes who are only interested in warming their seats?

IC should NOT be made to loose its brand at any cost! AI's problems are of its own creation and IC cannot be made to pay the price for it.

COUGAR · Member

Never considered IA to be worthy of being in this business, inspite of having a monopoly in the domestic aviation, it was only after the likes of DN entered the market that we saw real growth in the dom Indian aviation

No skin off anyones back man! IA can make a better business case in todays aviation market than ANY other airline in the Indian skies: and this includes both AI and DN. Despite hundreds of crores of subsidy pouring in the form of Haj or bilaterals, AI remains in the red.

While DN has creditably opened up the market I see it filling in the role once played by Vayudoot than as a serious player on the mainstream market. Ofcourse its airbuses are there, but DN is loosing money on the Airbus routes. Only its ATR flights are considered viable in the long term, and after the inevitable shakeout over the next 3 years, expect to see DN pack off its Airbuses and become a full fledged ATR airline.

IC remains a mainstream full-service operator competing with 9W, S2, and KF. And if you compare the market shares here, IC remains extremely competitive.

As for Gopinathan: he is just one sore looser who needs to realise sooner rather than later that u need to learn to walk before you can run! He was in terrible hurry to get Airbuses and fly international and hence the 334 crroes losses staring at him in the face!! He should have consolidated his position by getting even more ATR42/72 type aircraft operating to small far flung airfields, and connecting on to a mainstream carrier (S2 comes to mind in the current context). If he had done this, he would have been the strongest aviation czar in the next 5 years!!

Undercutting my foot. Among all the players, 9W sells far more seats in the discounted category as compared to any other player, followed by S2. And this reflects on their bottomline. IC has followed a more realistic strategy with regards to fares which meant that though they lost market share, they have remained profitable.

9W, S2, DN and AI are all loss making. IC is profitable. You make your own conclusion!

tayara mechanici · Member

COUGAR wrote:

Never considered IA to be worthy of being in this business, inspite of having a monopoly in the domestic aviation, it was only after the likes of DN entered the market that we saw real growth in the dom Indian aviation

No skin off anyones back man! IA can make a better business case in todays aviation market than ANY other airline in the Indian skies: and this includes both AI and DN. Despite hundreds of crores of subsidy pouring in the form of Haj or bilaterals, AI remains in the red.

While DN has creditably opened up the market I see it filling in the role once played by Vayudoot than as a serious player on the mainstream market. Ofcourse its airbuses are there, but DN is loosing money on the Airbus routes. Only its ATR flights are considered viable in the long term, and after the inevitable shakeout over the next 3 years, expect to see DN pack off its Airbuses and become a full fledged ATR airline.

IC remains a mainstream full-service operator competing with 9W, S2, and KF. And if you compare the market shares here, IC remains extremely competitive.

As for Gopinathan: he is just one sore looser who needs to realise sooner rather than later that u need to learn to walk before you can run! He was in terrible hurry to get Airbuses and fly international and hence the 334 crroes losses staring at him in the face!! He should have consolidated his position by getting even more ATR42/72 type aircraft operating to small far flung airfields, and connecting on to a mainstream carrier (S2 comes to mind in the current context). If he had done this, he would have been the strongest aviation czar in the next 5 years!!

Undercutting my foot. Among all the players, 9W sells far more seats in the discounted category as compared to any other player, followed by S2. And this reflects on their bottomline. IC has followed a more realistic strategy with regards to fares which meant that though they lost market share, they have remained profitable.

9W, S2, DN and AI are all loss making. IC is profitable. You make your own conclusion!

Haj run is a unprofitable irritant around AIs neck. In U.K. the charters to haj are operated by the desperate, and most of their oldest eqpt is positioned there because of the rates offered. GOI cannot get the worst operator with a Super constellation or a caravelle for the rates they have to offer for the HAJ. Its poor old AI that has to fulfill this obligation along with the PMs flt where 2 a/c are pulled out of the fleet.

In 3yrs DN has managed to challenge a state funded 50yr old behmoth for the 2nd position speaks volumes of that airline. DN has a sound startegy, the ATRs and AB aare op on diff route segments with their own unique revenue model. The ATRs earn better yield but only supplement the AB routes, with fuel going down and new single config A320s against the 2 config A319s of IA. DN market share is going to go skyward, Gopi is one man who was destined to fly as others crawled in their attempts to walk, which they only could with the state supported crutches.

IA had to show some profit as the only airline within india with the largest fleet of owned/depriciated aircrafts and infrastructure. The competition is paying a higher lease rates or interest on new purchases, where as IA prefrential rates being a state funded airline, risk mitigation is nil.

To be challenged within 3yrs by a start-up is a sign of the management qualities, of the challenger and the challenged.

COUGAR · Member

Haj flights are unprofitable? then why is AI fighting tooth-and-nail to prevent 9W and S2 and even IC from bidding for them? Even the minimal ops that IC did for Haj (ex-Srinagar, Jaipur and LKO) were under AI. S2 in particular made a determined bid and AI was throwing a hissy fit at even discussing the prospect of other carriers operating Haj.

The problem with DN is how sustainable is their model? If IC went in for the kind of discounting that DN or 9W or S2 did, then their market share would also be higher. Right now DN is playing for market share at the expense of yields and this is showing up on the balance sheet. How sustainable is that goin to be in the long run?

But IC and IT are 2 carriers which are concentrating on better yields and thus profitability. No prizes for guessing which model is sustainable in the long run.

And this still does not explain AI's inefficiencies which is the main argument against a merger leading to a loss of IC's brand. How can you merge a profitable, well-managed airline into an underperforming, third rate airline like Air India? THAT is the question.

The other way around (ie AI being merged into and managed/operated as separate line under the IC brand) is something that can be talked about as it makes more sense.

COUGAR · Member

AI does not need to suffer when 2 of its aircraft are pulled out of its fleet for the PM's travels.

In case u didnt know so far, under an agreement signed in 2002(or nearabouts) the annual lease charges for 3 747-400's in AI fleet are paid to AI by the Govt. In return AI promises to make 2 747-400's available in the VIP config for a total of 30 days flying in a year.

So AI gets the lease charges for THREE 747-400's paid by the Govt which it can use for 365 days a year!! It has to set aside 2 of them (any 2 747's) for just 30 days in a year! Again another example of subsidy!!

If AI schedules are still affected by VIP flights, then it is due to gross mismanagement by AI itself. This is a fit case for transferring VIP flying responsibility to IC. The Govt should take away this responisbility from AI and hand it over to IC with a similar deal.

The Govt can pay for the annual lease charges for 3 A340-500 type aircraft which can be maintained and flown by IC on their international ops (in addition to the A330-200 and -300's they are acquiring). IC can agree to provide VIP transport on 30-days with 2 of these aircraft. Even better, they can also set aside one A320/A319 for use on shorter hauls and domestically.

AI need not carry this "burden" any further, since it is clear that they are plain incompetnt to do so!!!

tayara mechanici · Member

COUGAR wrote:

AI does not need to suffer when 2 of its aircraft are pulled out of its fleet for the PM's travels.

In case u didnt know so far, under an agreement signed in 2002(or nearabouts) the annual lease charges for 3 747-400's in AI fleet are paid to AI by the Govt. In return AI promises to make 2 747-400's available in the VIP config for a total of 30 days flying in a year.

So AI gets the lease charges for THREE 747-400's paid by the Govt which it can use for 365 days a year!! It has to set aside 2 of them (any 2 747's) for just 30 days in a year! Again another example of subsidy!!

If AI schedules are still affected by VIP flights, then it is due to gross mismanagement by AI itself. This is a fit case for transferring VIP flying responsibility to IC. The Govt should take away this responisbility from AI and hand it over to IC with a similar deal.

The Govt can pay for the annual lease charges for 3 A340-500 type aircraft which can be maintained and flown by IC on their international ops (in addition to the A330-200 and -300's they are acquiring). IC can agree to provide VIP transport on 30-days with 2 of these aircraft. Even better, they can also set aside one A320/A319 for use on shorter hauls and domestically.

AI need not carry this "burden" any further, since it is clear that they are plain incompetnt to do so!!!

Never supported any state funding to AI. For all i care let the GOI lease 2 a/c and park it year long or if they want it to be commercially viable wet lease it to any of its 2 pampered offsprings.

COUGAR · Member

Tayara: right now the ONLY pampered offspring is Air India. And if these 3 aircraft are pulled out of AI's fleet, out goes its much publicised "scissor hub" thru FRA, since these 744's are providing the backbone for this route.

The scissor hub at FRA is one of the few remaining cash-cows for AI. What will they do once 9W introduces a similar concept? The 9W idea for operating via-BRU seems like a copy of the scissor hub concept!

tayara mechanici · Member

COUGAR wrote:

Tayara: right now the ONLY pampered offspring is Air India. And if these 3 aircraft are pulled out of AI's fleet, out goes its much publicised "scissor hub" thru FRA, since these 744's are providing the backbone for this route.

The scissor hub at FRA is one of the few remaining cash-cows for AI. What will they do once 9W introduces a similar concept? The 9W idea for operating via-BRU seems like a copy of the scissor hub concept!

Are you saying BRU offers the same level (%) of feed as FRA ? The reason AI is consolidating at FRA is to chip into the LH traffic, it has a profitable operation out LHR / U.K. It is a wise decision to exploit translantic as well as Asia bound traffic out of FRA rather than put all their eggs in th U.K. basket at the cost of yields. Lets get this thing clear i am strctly against any state funding of the services industry via PSU, having said that when you analyse the op of the state funded entities AI has made some very wise startegic decisions. It has allowed foreign airlines to start ops into various destinations in India, as soon as they have built up the route they go on to cherry pick the traffic. Ex is LH and EK. AI decision to start LHR-CCU after EK has built the market is fantastic, how well do they end up retaining this business can be debated.

I am sure on second thoughts you will agree with me on AIs strategy.

Nimish · Member

COUGAR wrote:

Tayara: right now the ONLY pampered offspring is Air India.

Oh no - I definitely feel that IC is equally pampered as AI. I don't really see a single "pampering" that AI has, but IC does not. Whether it's protection on the global scene, or protection of the gulf sectors, AI & IC share the same benefits. Whether it's reserving large parts of the existing airports - same scene. New a/c - both got decided at a similar time and based on their individual preferences. IC ground staff is as good/bad as AI's, I dont' really see a difference there (except for the IC call center which is quite good - is that outsourced?). Websites - both are a sham. If IC can be called "competent" with 12 (or was it more?) a/c lying dead, well - then that's an award I'd rather not get. And if they're so profitable, why aren't they paying for the spares needed for the a/c that are lying dead? I'm sure the profitable part of IC is just another round of the govt dressing it's own books, else there's no reason to keep such a large part of their fleet on the ground.

crew320 · Member

Nimish wrote:

except for the IC call center which is quite good - is that outsourced?).

Yep, and the contracted employees get peanuts..

aM

COUGAR · Member

12 aircraft lying "dead"

This is part of sked maintenance. Every airline with a sizeable fleet, including 9W, will have a number of aircraft in sked maintenance at some time. The ops will ensure that there are aircraft to cover for those in maintenance.

Sometime in the late 90's, some of 9W's ops to IXE and COK ran into some rough weather when a whole lot of 737-400's had to be sent to Malaysia for similar maintenance or something.

As usual the media plays up anything that has refers to IC without understanding the subtleties! :)