| In an exclusive interview withBusiness Standard, Arora breaks his silence over how he sees the Naresh Chandra committee's recommendations on privatisation of IA and Air-India, and the proposed opening-up of foreign routes to domestic private airlines. Excerpts: |
| How good or bad has been IA's performance this year? Performance in the airlines industry can be characterised under two heads "" physical and financial. As far as physical performance is concerned, IA's on-time record has dramatically improved to 90 per cent on the metro routes and 80 to 85 per cent on non-metro routes. |
| Four years ago, it was 65 per cent and 55 per cent, respectively. Our annual average utilisation of A-320 aircraft, the mainstay of our fleet, has gone up to 3,300 hours compared to 2,700 hours in 2000. This means that even without augmenting our fleet capacity, we have been able to use our existing fleet optimally. |
| On the marketing side, IA has stopped being reactive to market developments. Whether others like it or not, it is IA that is setting the agenda in today's market. |
| In 2000-01, we came out with the flexi-fare concept, which is now being practised by our rivals. Efforts have also been made towards product upgrade through greater staff courtesy and offering a more diversified cuisine. |
| What about bottomline figures? On the financial front, it is not just IA, but all domestic scheduled airlines that have been badly hit by the increase in the price of aviation turbine fuel (ATF) in March 2001. ATF prices were stable between 1996 and 2000. |
| On March 23, 2000, ATF prices were increased from Rs 15,200 per kilolitre to Rs 18,000 per kilolitre. And by September 2000, prices touched Rs 22,500 per kilolitre. ATF accounts for 30 per cent of our operating expenses. |
| In developed countries, the share of ATF in the total operating costs of an airline is only 15 per cent as both, taxes levied on the fuel and the basic price, are low. So, though we are in the red, we can draw some satisfaction that our losses at Rs 195 crore in 2002-03 were Rs 50 crore less than our nearest competitor. |
| How do you plan to end the current year? Owing to the steep hike in ATF prices, the rise in navigational charges, the fall-out of the 9/11 attack and the outbreak of SARS, our main strategy has so far been to achieve progressive containment of losses. |
| We hope to end the current financial year with a much lower loss than last year. But while judging us, please remember that 2001-02 was regarded by the International Air Transport Association (IATA) as the worst year for civil aviation "" a year when the combined losses of all airlines wiped out their combined profits earned during the last 50 years. |
| In such a scenario, we cannot be happy with the losses. But we do have the satisfaction of being afloat and kicking, while many players have gone under. |
| The new civil aviation policy, based on the recommendations of the Naresh Chandra committee, seems to have become a bone of contention. How do you assess the recommendations and the new policy? Since the Naresh Chandra committee's recommendations are still under discussion, it would be inappropriate to make specific comments. It is true that IA and other operators were called by the committee to give their views. My point has always been that if the entire nation is poised to march on the super-highway of reforms, IA and Air-India should not be left behind. |
| But how do you achieve that? It is possible if there is a serious move to consider the privatisation of these carriers to provide a level playing field in terms of managerial autonomy and the commercial decision-making process. If the idea of privatisation is accepted, there will be two crucial questions "" one, the state of the fleet and two, the protection of the bilateral regime under which the state-owned carriers have access to different foreign markets under bilateral rights. |
| On the fleet issue, there is a dire need to augment as also replace the fleet capacity. There can, of course, be a debate over whether the fleet capacity should be augmented at the time the government is contemplating privatisation. |
| Where the protection of bilateral rights is concerned, it is like the family silver that will be a crucial basis for valuing the companies at the time of privatisation. You will remember that both IA and Air-India had been put up for disinvestments earlier and all the bidders had sought protection of the bilateral rights for a certain period of time. |
| Is there any problem in throwing open the foreign routes to private players? If indeed the bilateral regime has to be opened up, why should the entire cake, including the uneconomic domestic routes, not be shared in terms of the market share and/or capacity? The point is that at present, IA deploys 17 per cent of its capacity in category II markets (the north-east and Jammu & Kashmir) against the obligation of 10 per cent. In category III markets (non-trunk routes), IA's capacity deployment is 68.5 per cent against the required 50 per cent. So, we are doing much more than others. |
| Your plan to augment capacity has run into some problems. How critical is that? Replacement as well as augmentation of capacity is critical for IA to survive. But since the proposal for acquiring a new fleet is now under consideration, it would not be correct for me to comment. However, we have tried to stay where we were by leasing 11 A-320 aircraft in the last two years. We also plan to lease four more A-320s for the coming summer. |
| After this induction, we will have marginally enhanced our capacity for the first time in the past decade "" apart from the additional capacities we generated by higher average usage of the aircraft. |
| Are you comfortable with your market share vis-à-vis that of the competition? It is not fair to compare our market share with our competition without taking into account our share in the industry's capacity. For instance, our market share on all the main metro routes is higher than our capacity share on these segments. |
| Our problem is aggravated also because we deploy our capacity to uneconomic non-trunk routes, which means lesser use of the fleet, higher costs due to multi-stop destinations, higher maintenance costs due to more take-off and landings, dilution in the quality of service and our inability to deploy the same capacity to more remunerative routes. If you compare the capacities, our market share is the same as our nearest competitor's. |
| Where do you see IA, say, five years from now? There are two scenarios. One is IA as a public sector undertaking (PSU). And the second is IA as a privatised entity. The second scenario is entirely hypothetical. A final view on its ownership is yet to be taken. |
| Assuming that IA's PSU status continues, it can dramatically improve its market share after the replacement and augmentation of its fleet. IA has to keep on making endeavours for an all-round upgradation. Personally, I feel that IA's direction will more or less be on this path. |
| Our proposal to acquire 43 aircraft, 24 of which are replacements "" 13 A-300s and 11 Boeing 737s "" will add to our total capacity. |
| There was a recent newspaper report about your leaving IA and taking up a government assignment abroad. Is that correct? No comment either on or off the record. |
| The government seems to have preferred IAS officers to head both the state-owned carriers for several years. Is that a good policy? Do you think IAS officers are better qualified to head an airline? Ultimately, it will depend on the individual and the cooperation he can elicit from his colleagues. It doesn't matter if he is an IAS officer or a manager from the private sector. |
| Either way, it is advantage-neutral. No company is run by an individual alone. It is a combined effort of the entire team "" from helpers to the managing director. The degree of cooperation cannot increase merely by three letters behind your name. |
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