Will Air India Ever Emerge Out of the Woods?

“Air India’s turnaround is a tough task,” says  Air India chairman Ashwani Lohani. 

The government is trying very hard to help Air India come out of the woods.

The profits of debt-laden national carrier Air India are weathered basically by immense interest costs and airport charges while increasing competition from budget carriers is slowing down its business.

Air India was given a Rs 3,02,310 million lifeline by the Union Finance Ministry in 2012 under a Turn Around Plan (TAP) over a period of 9 years to keep it alive.

“As per the 2012 TAP, the government will infuse Rs 1,89,290 million for repayment of government- guaranteed loans/interest till FY 2010-21,” Minister of State for Civil Aviation Mahesh Sharma has said. The government has already approved Rs 17,130 million equity infusion into the carrier for the current fiscal in line with TAP. This equity infusion also includes the financial support towards repayment of principal as well as interest on government-guaranteed loans taken for aircraft acquisition by the airline.

Mahesh-Sharma, Union Minister of State for Civil Aviation

Till March, the government has already infused Rs 2,22,800 million into the carrier as part of the bailout package.

In April, Minister of State for Civil Aviation Mahesh Sharma informed the Parliament that Air India may trim losses by more than half to Rs 26,360 million in FY16 as compared to a net loss of Rs 58,599.1 million in FY15.  

A reduction in loss is the only notable performance for Air India to show during the past one year. This, too, was achieved when the ATF prices were low and the passenger demand was high which also benefited other airlines. 

Despite all these efforts, the Air India CMD Ashwani Lohani says that turning-around Air India is a tough task. 

“To wipe out all of Rs. 2,80,000 million of accumulated losses is a “tall order”. It will take decades to wipe that off.” Lohani said.

All he could say at present: “The airline is looking to become ‘profitable on a year-to-year basis’ in the next three years and not seek any government money beyond the Rs. 3,00,000 million already sanctioned.”

Insiders spoil the show.

Yesterday, Air India was forced to suspend its entire passenger loyalty rewards programme.

Nearly 0.2 million Air India dedicated customers will lose out on benefits. The programme called Flying Returns had 1, 95,000 frequent flyer accounts, but it is yet not clear how many flyers were actually affected. Frequent flyers do not know how the points they will gain while flying during the suspension period will be credited to their accounts. All the affected membership accounts have since been suspended. The entire set of user IDs which have been dormant since the last three months have also been deactivated.

Unscrupulous hackers had stolen loyalty programme points worth Rs 1.6 million, as reported earlier in these columns.

As suspected at the beginning of the investigation by Delhi police, it was an insider’s job, the programme was hacked into, administrators’ control taken over.

The matter first came to light on June 8, when an Air India staffer verifying documents, noticed that one account was already verified by another employee. The document submitted as identity proof was a driving licence, something not on the list of accepted proof. Air India accepts passport, PAN card, voter ID or Aadhaar card as identity proof from customers. Further the driving licence was also found to be fake and an internal probe showed 23 such fake accounts.

The hackers have accessed user IDs and passwords of some of the website administrators to verify several such fake accounts and claimed frequent flyer rewards. The cops investigating the matter said,”The hackers had managed to sneak into several accounts of Air India employees. This is clearly a well-organised crime and we are analysing all possible angles.” 

The Delhi Police has said that such an incident was “entirely preventable” had Air India carried out periodic anti hacking drills as mandated by the International Air Transport guidelines. Alarmed officials from the Civil Aviation Ministry have now asked all Indian airlines to conduct cyber safety drills.

Inconvenience to  passengers.

Air India has been penalized by the district consumer disputes redressal forum of Vadodara recently for causing inconvenience to a passenger. The airline was asked to pay a fine of Rs 25,000 by the consumer forum that also pulled up the management for deficiency in service and unfair trade practice. P V Moorjani, who was one of the passengers on the Vadodara-Delhi flight of Air India had filed a complaint against the airline in 2009.

Exodus  of Air India Pilots Imminent.

Air India’s Boeing 777s fly the farthest in the airline’s network – including on the Delhi-San Francisco route which is one of the longest non stops in the world – but its pilots face a 10% cut under the new pay structure. Now, Air India stares at an exodus of these pilots to foreign, especially Gulf carriers, who are offering them with 1.5 times their present pay, tax free.

No wonder then, despite all his sincere efforts, the Air India CMD Ashwani Lohani says that turning-around Air India is a tough task. The present scenario being 1 step forward, and 3 steps backwards.

$24,000 Worth of Air India Frequent Flyer Miles Hacked

  • Unknown elements hacked into the loyalty program of at least 20 suspected accounts of Air India fliers and rob nearly $24,000 (Rs 1.6 million) worth of frequent flier miles.
  • Hackers targeted Air India 
  • The full extent of the theft is not established yet
  • Delhi Police team is probing how hackers broke into the Air India system
  • It is suspected the hackers had inside knowledge of the loyalty scheme, police claim.

Investigators are yet to ascertain the number of accounts affected. They now know that the hackers had created 20 different email IDs and diverted reward points into their accounts. In the mean time, the hacked accounts have been deactivated and the false IDs have been suspended.

Praveen Lal, commercial manager at Air India, told media: “All the affected membership accounts have been suspended so that no further activity can take place from these accounts. Also, all such user IDs that have not been active for the past three months have been deactivated.”

The programme is named as Flying Returns, which has over 195,000 customer accounts.

Since a number of the such spurious tickets were bought using invalid IDs and were signed with the same signature, Delhi Police suspect the involvement of an insider familiar with security ambiguities. The police believe that it has been a well-coordinated hacking operation targeting members of Air India’s frequent-flyer programme. The hackers may have been aided by a company insider, travel agency staffer, or one or more former Air India employees. The thought is that only someone who knew the loopholes and vulnerabilities intimately would have been able to pull off the act.

A manhunt has been launched to find out the people behind this heist.

One police source said: “Both a virtual and a physical manhunt has been launched to trace the perpetrators.”

To trace the culprits, investigators resort to the familiar method, namely, find out the beneficiaries. They look for flights which were bought using the stolen miles. They have also asked the airline to give them a list of employees who have quit the company recently.

While the probe is ongoing, investigators say they have uncovered so far one single piece of evidence in the form of an IP address from one suspect computer. Now, the investigators are working with an internet provider to obtain more personal data.

Air India has said that one person has been identified as holding a suspect travel ticket and it is now attempting to contact the passenger to find out which agent was used to book the trip.

It is not the first time that an incident like this has happened. Several other airlines have suffered similar thefts. This includes British Airways, American Airlines and United Airlines. Last year, British Airways faced a similar incident. It was forced to freeze “tens of thousands” of frequent flyer accounts after being victimised by a cyber attack on its systems.

In a separate incident in 2014 a Miami-based computer programmer was arrested for booking international trips and accommodation using stolen flyer miles worth $260,from American Airlines.

In fact, it has become such a public problem that United Airlines actually rewarded two white-hat hackers, under the airline’s bug bounty program, a million frequent flyer miles each to show them the loopholes in their system so that they can better protect themselves and their customers. 

Air India Faces Labor Unrest, Strike; PM’s Intervention Sought

PM Modi in a NITI AAyog meeting

NITI Aayog has submitted its proposal to the Prime Minister’s Office on strategic sale, privatisation of PSUs and closure of loss-making units. The NITI panel, headed by its Vice-Chairman Arvind Panagariya with CEO Amitabh Kant and other members on board, has prepared a detailed blueprint on PSU reforms. The Aayog has already submitted two lists of PSUs for strategic sale and closure or sale of sick units.

Although the panels’ recommendations has not been made public, media reports indicate that it has suggested the government to reduce its stake to 49% or below in PSUs at one go under the strategic sale option.

The government has set a disinvestment target of Rs 5,65,000 million for this fiscal. Of this, Rs 3,60,000 million is to come from minority stake sale in PSUs and Rs 2,05,000 million from strategic sale.

The government began the disinvestment process for the current fiscal with 11.36% stake sale in NHPC. It raised Rs 27,000 million. During 2015-16, the government raised Rs 2,53,120 million through disinvestment, less than half the target of Rs 6,95,000 million. It had raised around Rs 2,45,000 million in 2014-15 by selling stake in public companies, about Rs 1,60,000 million in 2013-14 and Rs 2,39,600 million in 2012-13. It had raised around Rs 1,40,000 million in 2011-12 and over Rs 2,21,000 million in 2010-11.

As expected, the NITI Aayog’s proposal to sell off the sick PSUs has brought together all the central trade unions of the country, who have decided to protest the only way they can: STRIKE.

RSS-affiliated Bharatiya Mazdoor Sangh and other unions have said that they would seek the intervention of the Prime Minister Narendra Modi.

“BMS opposes NITI Aayog’s proposal to close sick PSUs… BMS demands that the government call a meeting of all stakeholders to discuss the revival plan of sick PSUs before proceeding to decide on the proposal of NITI Aayog. Otherwise, we will be compelled to come on to the streets to oppose the move. “BMS general secretary Virjesh Upadhyay said in a statement.

“The AITUC Secretariat has taken serious note and condemned the proposal for strategic sale of Air India, Chennai Petroleum, Madras Fertilizer and FACT by NITI Aayog. AITUC has also condemned Aayog’s proposal to wind up 28 PSUs and long-term lease of ITDC hotels. AITUC appeals to the Prime Minister not to accept the proposals as submitted by NITI Aayog on strategic sale and winding up the so-called loss making PSUs and stresses on revival of these units,” All India Trade Union Congress Secretary D L Sachdev said in another statement.

Vishwas Utagi, convenor of Trade Union Action Committee of Maharashtra has said that the All India Bank Employees Federation will be meeting in Chennai on June 16 to decide on action against government’s decision to merge the State Bank of India’s associate banks with SBI.

A blunt reaction came from Tapen Sen, General Secretary, Centre of Indian Trade Unions: “We are opposed to it. The government is moving on expected lines to sell the country.”

Sen said further, “What is surprising is that now the government wants to sell those PSUs on which crores were spent for revival. This will definitely be one of major issues at the nation-wide Bharat Bandh on September 2, 2016.”

Indian National Trade Union Congress Vice-President Ashok Singh echoed his point, saying the union is against the proposal to sell sick PSUs and will oppose this.

The reactions so expressed by the Unions mainly point to :

  • Why should the whole PSU suffer because of the wrong doings of its so-called top management? The said PSU is sick, but its top managers are both healthy and wealthy.
  • Why the government wants to sell those PSUs on which millions have been spent for revival?

NITI’s views:

  • The Central Public Sector Enterprises (CPSEs) have been identified on the basis of their strategic importance and have been accordingly classified as high and low priority firms. 
  • A non-priority sector CPSE, once revived, could always be considered for strategic disinvestment at an appropriate stage
  • The idea behind the recommendations is to ensure government gets rid of non-viable public sector enterprises as huge amount of money is sinking into these companies. 

An official of the All-India Service Engineers Association of Air India said they would be calling a meeting of all unions to decide on further action. He said that the government should take the Unions into confidence before taking any decision. The government should go into the wrong decisions taken by the higher ups in the Air India management that have led to losses. He pointed out to the decision to set up the maintenance, repair and overhaul unit in Nagpur. The hangars are lying empty as no airline wants to go to Nagpur. (As reported earlier in these columns : Heads I win, tails you lose” : Latest MRO Offer from Air India ).

The long awaited civil aviation policy was released on 15th June. It is silent on Air India disinvestment. On Air India, the Civil Aviation Minister Ashok Gajapathi Raju has said in a recent interview, “It’s a beautiful airline so in that sense you will like it to survive but you can’t commit the taxpayers’ money for eternity. It won’t work that way.” 

This year Air India somehow managed to show a moderate operating profit, although this was aided by low ATF prices. With a strike like situation coming up, the performance of Air India is bound to come down. It has now become a classic case of 1 step forward and 4 steps backwards.  

Till 1990s, Air India thrived on monopoly. In 2016, the situation is vastly different. 13 other scheduled airlines have emerged and have defeated Air India in its own game. The irony is:  “The men and women who make up these 13 Airlines are actually the products of Air India.”

In 2016, such industrial unrest does not have any meaningful impact on the consumer, the end user because the consumer has plenty of other options to chose from. AI’s competitors start smiling. The Civil Aviation Minister Ashok Gajapathi Raju has repeatedly said that Air India has to pull up its socks and work in a more disciplined way. Air India has often been criticized for its overstaffed workforce. AI’s 30,000 employees may not be absorbed elsewhere with similar pay-package. But 1000s of other jobless citizens of the country will be more than willing to work at half that package!!

Isn’t it strange? In job, or out of job; one is never happy. Aptly sung by Asha, Bhupinder and others, “kabhi kisi ko muqqamal jahan nhi milta..” (Nida Fazli’s immortal lines can not be translated in English or any other language).

Against such a backdrop, it can be said that by resorting to strike, Air India has everything to lose and nothing to gain.