Tough road ahead for new Air India chief

Rohit Nandan, 54, a joint secretary in the civil aviation ministry, has been appointed as Chairman and Managing Director of Air India for a three-year term last week.

By accepting the post, Nandan - a 1982-batch Indian Administrative Service officer from the Uttar Pradesh cadre - has probably taken on one of the toughest corporate challenges in recent history, namely turning around the chronically loss-making national airline.

The biggest problem that Nandan faces is being able to simultaneously improve Air India's earnings and decrease debt.

The airline is bleeding Rs. 600 crore (Rs. 1 billion) every month and is burdened by over Rs. 40,000 crore (Rs. 400 billion) in debt.

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Working capital loans of the carrier have also crossed Rs. 21,000 crore (Rs. 210 billion), which is just Rs. 1,000 crore (Rs. 10 billion) less than their entitlement on their equity base of Rs. 3,145 crore (Rs. 31.45 billion).

Its losses total around Rs. 20,000 crore (Rs. 200 billion). These are numbers that can make the most experienced turnaround gurus flinch with anxiety.

Meanwhile, the government hasn't given any reason for the decision to replace Arvind Jadhav, the erstwhile chief of Air India, whose three-year term was scheduled to end in May this year.

Industry insiders point to a thriving culture of high-handed decision-making that continued to alienate employees, including pilots - its bread and butter.

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In fact, Air India has been haunted by labour problems because of it. In May, 750 pilots went on a nine-day strike over pay and promotion issues, forcing the airline to cancel more than 200 flights daily out of a total of 500.

Considering these significant hurdles plaguing Air India, it is a good thing that the government has chosen a man whom they regard as a troubleshooter.

In fact, this isn't the first time Nandan has been chosen by the government to turn something around.

He was one of 10 IAS officers selected by the cabinet secretary to monitor and expedite the completion of venues in the run-up to last year's Commonwealth Games.

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One story making the rounds is about how, at one of the CWG tennis stadiums, a crisis was unfolding as the Australian contractor refused to go ahead with laying down the carpeting because of intermittent rain.

He preferred to wait until the rain had stopped for good. Nandan, however, was able to spur the labourers into action.

"He convinced the labourers on the grounds that the pride of the nation was at stake. And he was successful in getting it done," said a source close to him.

Of course, mending the Air India mess is a different kettle of fish altogether and questions remain about whether he has any chance of reviving the national airline where others have failed.

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One positive move by Nandan has been the removal of senior management - specifically, Sandeep Marwah and NK Berry - who, insiders say, contributed to escalating tensions between management and employees during Jadhav's tenure, by doing things such as stopping privileges to pilots and arbitrarily changing rules.

This move has instantly endeared him to employees.

"His decision to remove the bunch of people running the airline during the earlier management has made us believe that the new CMD is for us and will give him full support. Together, we will work towards reviving the airline," said a senior official of the national carrier, who did not want to be identified.

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Still, operating the airline while scripting a coherent turnaround plan and then executing it successfully is a mammoth task and would require Nandan to take some tough decisions.

One of the major issues that needs attention is that of personnel integration between Air India and the erstwhile Indian Airlines, which is not complete even five years after the merger.

A massive financial burden because of pricey aircraft acquisitions doesn't help either.

"Decisions need to be taken on whether they still need those new aircraft or not. The airline is not in a financial position to pay for those aircraft," says Mohan Ranganathan, an aviation analyst.

Good thing they have chosen a man of action for the job.