Indian Airline NEWS: Treat Air India as a commercial airline, not a national carrier

In December 2005, state-run Malaysia Airlines had cash to support just four months of operations. Two years later, it posted a profit, following a dramatic turnaround. India’s national flag carrier Air India Ltd is now almost in a situation which Malaysia Airlines was facing in 2005. The airline’s managing director (MD) and chief executive officer (CEO) Idris Jala led the carrier from the brink of bankruptcy to record-breaking profits though he had no industry background when he took up the assignment.

Tengku Azmil Aziz, current MD and CEO, was part of Jala’s team as executive director and chief financial officer. Aziz recounted in an interview the transformation of the airline, a business strategy that Air India can emulate. Edited excerpts:

Malaysia Airlines’ turnaround story could be an inspiration for Air India. Could you share the experience?

Yes, the situation was similar to Air India. If I rewind to 2005, we had then reported a record loss in the airline’s history. There were a lot of challenges when we were making business turnaround plan. We needed to do something radical; not something better. The 47-page plan was unconventional in every aspect.

What was that?

We were very upfront in publicizing our ambitious targets. People were puzzled and called us nuts. They alleged that the CEO was not from airline industry. Our idea was that everybody should know about what we are doing. So that you cannot hide behind numbers. Our plan was to cut the losses to half in the first year; break-even in the second; and profits in the third year. But, by second year, we made record profits.

How did you do that? Air India has a 100-page turnaround plan.

There is no single solution. A turnaround comes from disciplined action. The question was what we can do to get it done rather than why it is not happening. Jala galvanized us. There was unifying spirit and our goal was very clear.

How did the employees react? Air India had faced stiff protest from employees.

There was a town hall meeting where we explained everything to employees. Somebody asked us about the Plan B. Our CEO said there’s no Plan B. This is it. He told them that either we make it work or we lose. After that, everybody was aligned. None wanted the airline to go down. The whole philosophy was about to do everything in 47 pages, irrespective of doubts about success or failure.

There is an allegation that private carriers are taking away Air India’s routes. You had a similar situation.

Yes, it was when the government decided to rationalize some domestic routes. Many routes went to rival carrier AirAsia. At one point, we were reduced to just four routes out of 123 while AirAsia enjoyed the monopoly. When you were doing a turnaround, it was very easy to give up at that point of time. Jala took up the issue and discussed with the government at length. Finally, we got some 23 routes from four. Eventually, AirAsia had to drop many routes as flight cancellations were over 60%.

What is the key takeaway for Air India?

If you want to run an airline business successfully, you need to run it as a commercial airline and not just a national airline. It is difficult to comment about Air India’s turnaround plan as I don’t have complete knowledge. But I do see Air India management is very serious about turnaround. I am glad to see that Air India has taken a leaf out from our book—that is about disciplined action. I don’t want to say that we are a clever airline. The crucial point is not about writing a turnaround but execution. That was very critical in our success.

Tell us one critical measure that you took for your airline.

One point in the turnaround plan was about cutting loss-making routes. In 2005, we were flying to too many destinations. We were like neither-here-nor-there kind of situation. We faced a lot of heat from politicians, when we tried to cut routes. We took a tough call in network restructuring and we pulled out from several routes. Fortunately, the government supported us.

Any mistakes that you made while implementing the plan?

We made many mistakes. The airline industry moves very fast. At every phase, you need to turnaround the company as it is dynamic in nature. In airline industry, you need to take decisions fast even though you don’t have correct and full information always.

What’s your outlook for the airline?

We are an ambitious airline, but don’t have any ambition to become one of the largest in the world. Our aim is to become profitable and successful.

Even Indian travellers are opting your rival AirAsia because of low fares.

We have been living with competition from AirAsia in different markets. We already have other competitors, even with local Indian carriers. One can look at the accounts of AirAsia and us. And that will tell you the story.

As far as fares are concerned, we occupy a different market segment. We are not here to match AirAsia fares, but we are competitive. The impression created about AirAsia is that it is all about pricing. At times, we are a little bit more (expensive) than AirAsia fares but then we offer more value.

Indian carriers are alleging that foreign carriers are dumping capacity in India. What is your strategy in India?

India is a growth market for us. We have been in India for more than 30 years and nobody accused us of dumping capacity. Overcapacity is a common concern, whether it’s in India or Malaysia. It creates loss-loss situation. Our strategy is to increase capacity to India by 40% this year. We will also be looking for second phase of code-sharing with Jet Airways (India) Ltd to connect more Indian points to fulfil our hub and spoke strategy. With Jet Airways, we compete and co-operate.

India may permit foreign carriers to take stakes in domestic carriers. Are you open to that?

It is not that something we are looking at now. But that doesn’t mean that we will not look at it. On an aviation perspective, India is still under-served. Less than 3% of the population fly here. Therefore, we are looking at all growth areas in India.

Malaysian Airline is also a reputed MRO (maintenance, repair and overhaul) player. It has entered into a joint venture with GMR Group to build an MRO in Hyderabad. The hangar has already been built. The operations should start this year. As of now, we will restrict our focus on MRO other than passenger airline business.

What next?

The 47-page business turnaround story is over. Now, we are in the process of implementing (a) 98-page business transformation programme that has to complete in 2012.