Air India is expected to earn cash profit by 2018! This is what the Civil Aviation Minister, Mr Ajit Singh, had to say while announcing the Turnaround and Financial Restructuring Plan for the debt-laden national carrier. He mentioned that certain milestones are to be achieved before releasing equity support of over Rs 30,200 crore between 2012 and 2021.
The release of funds would be subject to achievement of the milestones, including pay load factor (PLF), on-time performance (OTP), fleet utilisation, yield factor and rationalisation of employee emolument structure. An oversight committee will ensure milestones are achieved before the release of funds. However, Mr Singh is non-committal on two key milestones placed in the draft financial plan.
Secondly, too many doubts are being raised on the planned milestones. One of them is achieving a PLF of 73 per cent by 2015 and 75 per cent by 2020. The latest statistics on the Web site of the Directorate-General of Civil Aviation (DGCA) say that Air India had lowest PLF among seven domestic airlines.
While even Kingfisher with a truncated schedule had a load factor of over 80 per cent in February, Air India could not manage to cross 70 per cent. Next is OTP. The plan says it needs to move to 75-85 per cent and to 90 per cent within two years. The DGCA data show Air India was last in February on this count. OTP performance indicates reliability. Business or transit passengers prefer an airline on the basis of its OTP record. Rationalisation of emolument structures can also be read as reduction of performance-linked incentives (PLI). Despite being in loss, Air India continues to give PLI.
The Department of Public Enterprises' guidelines say that unless the company is in profit, it should not give PLI. But since Air India has not signed a memorandum of understanding with the Department, it is not bound by the guidelines.
Politically-sensitive
Though the plan has listed one of the milestones for release of equity as “entitlement for PLI ceases until profit before tax are generated,” the Government has not clarified how this will be achieved. When asked, the Civil Aviation Minister said implementation of the Dharmadhikari Committee suggestions will help in achieving this.
The draft plan says a voluntary retirement scheme, another key milestone ignored, is to be worked out in three months. This is important as the number of employees for an aircraft in Air India is much higher than other carriers. However, the Government does not seem to touch such a politically sensitive issue. It is relying on the fact that with employees retiring, the number will come down.
The Government is using taxpayers' money with a half-hearted effort to improve Air India's performance. If it continues like this, it won't be surprising if the Government comes out with another Turnaround Plan and Financial Restructuring Plan in 2021.