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Date: 2024-02-24 Page is: DBtxt001.php txt00000463

The airline sector in India

Huge fund flows changed the structure of the airline sector in India ... a maybe huge corruption

Corruption is one of the very big issues that has destabilized the global economy. It is very profitable for the people engaged in corruption, but their profit is a loss for the rest of society. There is never enough data to serve as evidence that will convict the corrupt, but connecting the dots shows where there is corruption and other inappropriate behavior. If rule of law will not solve the problem of corruption, then society must find other means, Connecting the dots and publicity that engages the public is one way forward.
Peter Burgess

What Really Happened?

This is a great article.

1. Will help you understand what went so wrong that - Debt before Praful Patel took over as Aviation Minister Rs 27crore(US$ 5.8mil). Current debt Rs 38,500crore(US$ 8.34 bil).
2. The latest CAG controversy.
3. How certain people can sell this country to fill their swiss bank accounts.
4. What can be done now. Now that the damage is done, what is a possible solution to the problem.

Pls note that the blogger is not the author of this article, it is a copy+paste from an article written by a journalist.


As I write this, Air India pilots, or to be more specific, pilots of the erstwhile Indian Airlines, now merged into Air India, are once again on the warpath against what they call a corrupt and inept management that is destroying Air India at the behest of private carriers, specifically Indigo and Kingfisher. The media has gone on a frenzy asking questions, fed to them by PR of competing airlines, on whether Air India should even exist. At this juncture, I would like to take a contrarian position and lend a voice of support to the pilots and staff of the national carrier who are waging a battle for survival against corporate raiders.

At the outset, let me say that It is quite fashionable to bash Air India, and the figures certainly don’t look good for them. Saddled with a debt of over 40,000 crores, badly handled merger adding to the losses and staff who cant seem to pull together even years after the 2 national carriers were merged.

Financial loss in 2009-2010 alone was around 5500 crores: the worst in its 80 year old history. But how did it end up this way? And is it right to blame the pilots for demanding answers from the management and the politicians? Time to add a little perspective here!

Rewind back to 2004: Air India was clearly struggling on international routes thanks to a sub-optimal fleet of 747’s and A310’s that hadn’t been renewed in decades because a minister sat on the files.

The domestic carrier, Indian Airlines did relatively better. After floundering for a while, it managed to find its feet under the leadership of Sunil Arora who effected a fantastic turnaround. Perhaps they did a little too well for the liking of the politically well connected owners of the then floundering private carriers. Because from 2004, one saw a systematic attempt being made to cut the wings of the national carriers to benefit the private carriers. Since the private carriers were not flying international at the time, their primary target back then was that thorn in their flesh: Indian Airlines. The minister for civil aviation, Mr.Praful Patel, a close friend and alleged “samdhee” of Vijay Mallya, became quite unpopular for his tendency to call up airline managers at Indian Airlines asking them to withdraw flights from specific sectors or change timings of existing flights so as to benefit Kingfisher which was back then just finding its feet. Infact, such was the zeal with which he pushed that airlines interests, that Praful Patel came to be nicknamed as “Minister for KingFisher” by sections within Indian Airlines.

In 2009 alone, Air India/Indian Airlines, pulled out of as many as 32 routes which had load factors above 90%, mainly in the Gulf and Singapore sectors. And its no surprise to see that the AI/IC flights have been replaced, one for one, by Kingfisher and Jet, at exactly the same timings as the erstwhile AI/IC flights!

On 12th October 2009, the management sent letters to station managers in Kozhikode, Cochin, Doha, Sharjah and Bahrain informing them of a decision to reduce or cut flights on these sectors. All these sectors saw loads of above 90% and were replaced by flights operated by Jet and Etihad airways. Other routes which saw exactly similar dynamics at work: Chennai-Colombo (just in time for Spicejet to start ops on the route), Kolkata-Bangkok (KingFisher started ops barely a week after IC was made to pull out), Kolkata-Singapore and London-New York! What can explain these decisions? Who was pressurizing the management to do so? And why?

They were also forced to share the hangars and maintenance infrastructure with Kingfisher: their competitor! This ministerial largesse was not extended to everyone ofcourse! It was a very select group that got the cream flowing off the ministers desk! Vijay Mallya of Kingfisher, Dinesh Keskar of Boeing and Rahul Bhatia of Indigo were on this exclusive list of the ministers friends.

A certain Captain Gopinath was too, until Mr.Mallya decided he wanted to get his grubby paws on Deccan and Mr.Patel himself decided to invest in Indigo. Capt Gopinath and his Air Deccan were excess baggage. After which point of course, the good captain found that he just couldn’t get the hangars to park those aircraft he had ordered or those permits he required to fly the Indian skies. Like a good businessman, he saw the writing on the wall and threw in the towel and sold out to Mr.Mallya while the going was still good! Pity! ‘Cos India needed another man who could fight out the system.

I am told that a certain Mr.Wadia had tried similar tactics to force Dhirubhai Ambani to sell out Reliance. Ambani showed the Wadia’s the finger and today, the Reliance group is a 1000 times larger than the Wadia’s! One can only imagine what would have happened if Captain Gopinath had done what Dhirubhai had done 3 decades before him.

Sadly that was not to be! With the demise of Deccan ended one challenger to the ambitions of Bhatia’s and the Mallyas. The other challenger, Indian Airlines that had so stubbornly stuck it out, would take some more effort. And certainly, no effort was spared to murder that competition! And since these fellows couldn’t take them on separately, these criminals decided to tie up these 2 airlines and burn them at the stake: which led to that ill-gotten merger.

One of the most startling policy decisions, and one that has certainly contributed to the mammoth hole that the national carrier finds itself in, was the decision to merge the 2 carriers Air India and Indian Airlines: the argument given was that this would allow an entry into the Star Alliance which it was promised would be the silver bullet to end all of the national carriers problems. No explanation was given on why the Star Alliance alone was chosen of all the options out there. Why not Skyteam? Or OneWorld? The minister ofcourse didn’t answer it then, and we don’t expect Mr.Patel to answer that one now!

One explanation given for the ill-gotten merger makes the most sense: and is the most disturbing. Most bilaterals signed between India and other countries have specific clauses limiting the access to bilateral to 2 carriers on each side. So on a route like Chennai-Singapore, we had Air India and Indian Airlines operating under their separate AOC’s which meant that Jet or KF wouldn’t be able to operate to Singapore even after they became eligible to do so!

But why worry when you have a obliging minister to do the dirty work: merge the 2 carriers so they operate on one AOC, cut the flights operated by AI/IC from 32 to 16 and voila!

Now Jet and KF can suddenly fly to Singapore! And Hong Kong! And Bangkok! and all the other places they couldn’t fly to if Air India and Indian Airlines had existed as separate carriers.

The reduction in flights was explained as “route rationalisation”: never mind if both AI and IC had loads in excess of 80% on these flights! What this route rationalization has done is to reduce the utilization of aircraft from 16 hours a day before to just over 8 hours a day today. What this does to profitability of the airline is anybody’s guess!

Indian Airlines and Air India were 2 very different airlines: with different work cultures, and different approaches to operations and route structures. The airlines did not merge out of their choice: this was a choice forced from above by a minister hand in glove with private carriers.

And the result is out there for everyone to see: Before the merger in 2007, Indian Airlines had a net loss of 280 crores and was on the verge of coming out into full profitability, having already stabilized operational profits on over 90% of its route network. The other airline, Air India, had a loss of around 400 crores: this meant a combined loss of around 680 crores, with the situation rapidly improving for both. Within three years of the merger however, the losses of the combined carrier have ZOOMED to 16000 crores, mainly on account of debt servicing of loans taken to pay for a fleet that they didn’t ask for: which is another can of worms altogether.

Fleet acquisition scam: Air India had made a request for 24 aircraft in the MCLR category (Medium Capacity Long Range) and even initially selected the Airbus A340-300. Indian Airlines on the other hand, had wanted a total 43 new AirBuses to replace the existing fleet of AirBuses they already operated: that’s a total of 67 aircraft. The minister, for reasons best known to him (and his friend Dinesh Keskar of Boeing), decided that number just wasn’t enough. So the actual order placed was for a whopping 111 aircraft, including 68 aircraft for Air India, instead of the 24 they had wanted.

Many of us following the process back then were stumped by how an airline with a turnover of a little over 7000 crores could place orders for aircraft costing over 32000 crores: the interest burden per year alone would come to 6000 crores! Infact the airline is shelling out over 8 crores PER DAY in interest payments alone!

Another stupefying factor was the complete lack of transparency in the order process. Rules were being bent and changed to benefit one manufacturer (Boeing) for reasons that are still not entirely clear. To give just one example, overnight the RFP’s were changed to ask for an aircraft that could seat 9-across, which effectively ruled Airbus out of the competition. And they weren’t even given time to respond to the revised RFP before the order was announced in favor of Boeing.

The Parliamentary Committee setup to examine the aircraft deal said this (I quote): “Reasons for going ahead with huge purchases by the civil aviation ministry despite Air India and Indian Airlines not having the capacity to support it, remain unknown to the Committee. It, therefore, recommends that this aspect needs to be further probed to fix the responsibility for taking such an ambitious decision that has become a big financial liability.” Airbus had back then clearly said that the order for aircraft was taken “for reasons other than technical or commercial”. You read between the lines!

Call Center and other conflicts of interest: Until 2009, the call center for Indian Airlines was being run by a firm called Omnia International. In 2009 however, a decision was taken, at the ministers behest, to award the contract to run the call center to, hold your breath, Interglobe Technologies, a company that later went on to setup Indigo airlines: the main competitor to Indian Airlines!! Imagine this: outsourcing your call center operations to be run by a competitor?

In the light of the Radia tapes, where Niira Radia talks of Patel having a stake in Indigo, this raises some disturbing questions indeed!

This is by no means the only instance where the door was thrown open to the wolves. A management consultancy was hired at a price of 90 crores to advise Air India on how they should restructure their operations. The contract was awarded to, hold your breath, Accenture Consulting: a company with close links to the UB and USL Groups which own Kingfisher, and which had previously worked on the acquisition of Air Deccan by KingFisher!

And as we speak, the pilots of Kingfisher are being called in to deal with the pilots strike at Air india! Truly the theatre of the absurd!

Bilaterals scam: The most deadly blow to Air India and Indian Airlines came from Praful Patel’s decision to parcel out bilateral rights to select foreign carriers like Emirates and Lufthansa whose business models depended a large part on passengers being flown via their hubs in Frankfurt and Dubai at cut-rate fares. No country on earth does this kind of free-fall parceling out of bilateral rights in the manner that Mr.Patel did. Was there a quid pro-quo? Is there a connection between Emirates getting rights and investments being made in Patels’ group companies? Is there a connection between Lufthansa getting rights and their investments in the MIHANS projects around Nagpur? Guess it will take some brilliant journalism to get at the route of this! Or perhaps just HONEST journalism!

I remember attending a party in Mumbai back in 2009, attended among others by my friends from the media. It was one of those parties, where all channels had kept their breaking-news competition on hold to enjoy themselves and let their hair down. The day was eventful as far as aviation went: a Kingfisher aircraft had just gone off the runway in Mumbai. One giggly journo I ran into, a correspondent with a major newspaper, was on the phone chatting, or rather part talking, part flirting, with someone on the other side. “To kya likhu bolna?” (Tell me what I should write then?). Turns out the person at the other end of the line was the PR executive for a spirits company! Needless to say, there was very little coverage of the incident in the media the next day. And there certainly wasn’t the kind of criticism that we have come to expect, if say the accident had happened to Air India. I believe the media fellows have even coined a phrase for this whoring: “winging it”! Apt choice of words indeed!

The very next day, a baggage cart (owned by a rival airline) banged into an Air India aircraft preparing to leave for Delhi resulting in a delay till the replacement aircraft could be found. The media reporting of this incident was of a very different tone indeed! Imagine this, an aircraft coming in to land, crashlands resulting in a total writeoff of the aircraft and the media reporting of the incident is virtually nil. In contrast, a baggage cart brushing the door of an air india aircraft prompts a television presenter from a major TV news channel to question whether Air India should continue to exist!

Air India has clearly been losing the media battle. PR’s of private airlines ensure that journalists get their share of goodies: free upgrades at the check in counters, invites to mad parties with no shortage of liquor (not too difficult when the airline is owned by a liquor manufacturer?), gifts at all major festivals etc etc. In return all they have to do is ensure favorable coverage for the airline and the competition is dissed. After all, all that Air India has in the form of PRO’s are executives who will read out press releases, parcel out chai-nashta and tata-bye bye! The media has been loyal indeed!

Lets take some incidents that happened to one private airline known for its “sexy” image and the media coverage of these incidents:

ATR coming into land at Mumbai goes off the runway. DGCA report blames the pilot and also pulls up the airhostesses for failing to perform their safety duties. Media coverage? ZERO! Similar incidents with ATR’s in Kolhapur, Indore, Pathankot. Again ZERO media coverage!

Airbus A319 taxing for takeoff strikes an ATC tower at Agartala. 2 passengers injured in evacuation. Media coverage: ZERO.

The same airline found carrying excess passengers by the simple act of making children, some as old as 12 years old, sit on laps of parents! Again no media coverage!

3 times in a week, Airbus A320 aircraft departing out of Hyderabad return to airport because of fire alarms in the cargo hold. Reason: carrying illegal chemicals in the cargo hold of the aircraft. Turns out this happened dozens of times with the SAME airline in Hyderabad. Media coverage: ZERO!

Another ATR coming in to land at Bangalore, looses it nosewheel and goes off the runway. Brand new aircraft, completely written off. Media Coverage: ZERO!

Contrast this with the coverage given to far less serious incidents at Air india. On one occasion, a major TV channel was running feeds from a passengers mobile from inside an Air India aircraft as “Breaking News”. “Passengers protest delay in Air India flight” not forgetting to add the question “Should Air india exist?” at the end!

All incidents concerning private airlines mentioned earlier happened with the SAME airline. That SAME airline in question, has, as I speak 18 aircraft lying grounded at various stations across the country in various states of disrepair. Some with engines. Many without. Some with missing noses, others with missing wings!

How many media houses have covered the truth of the murky, underhanded and shady manner in which Kingfisher Airlines is being run? How many media houses have covered the shoddy maintenance practices at this airline which continues to fly poorly maintained planes with impunity? Lives are at stake here, and clever PR is being used to mask shady maintenance practices. And the media is becoming ally to them?


There is no option but to disinvest the Govt stake in the airline. But like a shrewd businessman, it should do so at a time when valuations are the highest, not the other way around. Right now valuation of the airline is at its lowest and vultures like Vijay Mallya, whose cronies played a big role in destroying this proud carrier, are itching to get their hands on this airline for cheap in the same manner as he did with Air Deccan. There is no way, the Govt will be allowed to sell off our national assets to corporate schmuck like the Vijay Mallya’s of the world.

The routes that Air India/Indian Airlines were forced to withdraw from and hand over to the Private carriers must be restored forthwith. The Govt must help restructure the crippling loans that the carrier has been saddled with due to the corruption of the previous minister Mr.Praful Patel.

And last but not the least: A CBI investigation must be ordered into corrupt and underhand dealings of Mr.Praful Patel and his cronies, namely Dinesh Keskar of Boeing, Rahul Bhatia of Interglobe Technologies and other promoters of Indigo, Vijay Mallya of Kingfisher and others including directors of Air India to get to the root of this crime.

The leads provided by 2G scamster, Niira Radia who alleged that Praful Patel had stakes in Kingfisher and Indigo need to be investigated thoroughly: especially since the decisions that Patel took to destroy Air India, benefitted these 2 airlines the most. There is a clear quid-pro-quo that can be established.

The case against Praful Patel: 1. Merger of airlines on flimsy reasons to benefit private carriers, 2. Placing aircraft orders far in excess of needs, in a non-transparent framework to benefit one manufacturer (Boeing), 3. Credit Terms for Aircraft purchase at inflated rates leaving airline with inflated interest servicing burdens directly contributing to loss, 4. Forcing airline to give up lucrative routes to enable takeover of these routes by private carriers, 5. Corruption in outsourcing contracts to competing airlines which also raises questions of conflict of interest.

Meanwhile my complete sympathy and support is with the pilots and staff of the national carrier, who haven’t even been receiving their salaries on time, even as the management led by the corrupt Arvind Jadhav and the ministers have been murdering the maharaja.

You go boys! We are with you in this fight!

I would request all of you in the airline industry to come out into the open and speak out against this rampant corruption in the ministry. A movement against corruption cannot be fought with shadows. I would request you to make your voices heard through this blog. This blog is an opportunity for all of you out there to speak up without fear! --

Paulose.K.Mathew , Chairman- TAFI- Kerala
Member National Industrial & Legal Council
Posted by Indian Citizen at 05:28
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