Being a PSU, Air India faces a unique set of constraints. In order to maximize its performance, the airline should take the most optimal decisions that satisfy these constraints.
On Monday I had to go to Mumbai on some work and I flew Air India. Normally I prefer to fly either Jet or Indigo, but given the short notice at which I had to plan my trip, and the fare difference between Air India and the other two (leaving aside some airline I don’t trust), I decided to go for the national carrier. Overall it wasn’t an unpleasant experience – my onward flight was late by ten minutes or so, while my return flight was on time. There was plenty of leg space, the food was good and online check in was hassle free. Yet, it looked like there was plenty of scope for improvement.
Now for a digression. The difference between club football and international football is that in the latter you cannot buy players (not strictly true – Spain got Brazilian born Diego Costa to play for them on account of 1. his Spanish passport, 2. that he had never played for his native Brazil, but this is an extreme assumption). To use a cliched term, in international football you need to play the hand that you’re dealt. Thus, the job of a manager of an international football team is to organize his team’s strategy and tactics according to the personnel available to him, rather than the other way round. For example, Dutch manager Louis van Gaal is known to favour a possession based passing game. However, given the set of Dutch players available to him, he has set them out as a counterattacking side.
Given the lack of degrees of freedom in running PSUs, it can be argued that running a PSU is closer to managing a national football team than it is to managing a club team. Government ownership and consequent pay structures, combined with the lack of a good lateral entry system to the Indian public sector, mean that it is hard for a PSU to “buy” personnel like private companies can. On the other hand, sacking PSU employees is a politically charged activity, and not easy to administer, so it is hard to get rid of deadwood also.
The traditional argument is that given these restrictions that PSUs face, it is impossible for them to perform at the same level as comparable private sector units. While this argument is well taken, what we need to be careful is to not let this mask any degree of poor performance by a PSU. The question, instead, that we need to ask is if the PSU is actually making best use of the “hand it has been dealt”. What we need to check is if the PSU is optimizing correct given the resources and constraints at hand.
Coming back to Air India, one of the stated causes of its poor performance is that it is overstaffed – it far exceeds its global peers in terms of the number of employees per aircraft (normally assumed to be a good metric of staff size). This was fully visible at the boarding gate on Monday, for there were four personnel with the task of barcode scanning the boarding passes. Most other airlines have two staff doing this. A clear case of overstaffing. While it may not be under the management’s control to downsize (see constraints listed above), what irked me was that they were not being put to best use.
Just to take a simple example, if you have twice the number of required staff at the boarding counter, all you need to do is to put in an additional barcode scanner and run two boarding lines instead of one – which results in doubling the pace at which the plane is boarded. This doubling of boarding pace means planes can have a much faster turnaround time at each airport – which means the number of flights that Air India can run given its stock of aircraft can increase significantly!
To take another example, Air India probably has the best leg space in the economy class among all Indian carriers – this is probably driven by the fact that a large number of government officers and ministers travel mostly by Air India, and holy cows mean that they are forced to travel “cattle class”, the airline offers some comfort. Now, while this means each plane has one or two rows of seats less than that of other carriers, it constitutes a massive marketing opportunity for the airline! Given the leg space and comfort and meals (!!), Air India can very well position itself as a premium carrier and try to charge a premium on tickets!
On an absolute basis, the recommendations above may not be optimal – it might be well possible to make more money by sacking boarding gate employees than by cutting boarding time, or it may make more business sense to add an extra row of seats than try to enhance legspace. However, given the constraints the carrier faces, these are possibly the “second best decisions” that the carrier can take. And by not taking these decisions, the carrier is not making as much money as it can make!
5 thoughts on “Reforming Air India (yet again!!)”
I traveled on Air India for the first (and last) time in 1984. JFK-DEL; CCU-BOM-JFK.
While that experience was OK, the horror stories I heard from many people, over the years – is what convinced me to never travel on AI again.
I had gone to Frankfurt to attend the Musik Messe in the early oughts. My friend from India had an emergency family medical issue, and had to go back earlier than his booked flight. It was a nightmare to try to get that sorted out at Frankfurt airport.
I knew the station manager in Los Angeles. He told me that they had to scrap the LAX-BOM flight for several reasons: apparently because of LAX restrictions on landing and flying out in the deep hours of the night and early morning – the connectivity at Mumbai was poor – most people ended up having to wait a lot before they could take their onward flights to other cities. But aside from that, there was the well publicized incident of lack of aircraft. Apparently the same flight that caused my friend hassles in Frankfurt (the aircraft had damaged its wheels on landing) had caused a massive backup at LAX. There were many families from central valley in California that were going to attend a wedding in Punjab, and they all had to go several days later. AI could not handle the hiccup properly.
Having dealt with Indian Embassy and Consular officials here, it is not a surprise to see a total lack of initiative or rational thought on the part of Indian “officialdom”. Unless AI is privatized, and I understand the constraints right now, it is NOT going to be worth trying it. Even if its legroom is good, food is good. Onboard services, I have heard from my relatives who flew, is apathetic.
Perhaps there needs to be a change in the groupthink and over a period of time, I hope, the public opinion will shift in favor of privatising the airline. There are very few official government owned airlines now. The most efficient, even in the Indian sector – Emirates, Singapore – are privately run, with government backing. That should be the model for AI.
Thanks for the comment. I agree with you that privatization is a necessary step to change the mindset at AI – maybe it’s a case of Sarkari employees just not realizing that they’re in the service industry (and lack of cross-pollination with competitors (except among pilots maybe) is possibly a key factor that drives this).
I’m reminded of this management theory (don’t know who propounded it) of service organizations having to be organized in an “inverted pyramid” manner – that the people dealing with the customers are effectively at the “top” and everyone else (including their managers who are one or more levels behind) “reports” to them. I remember reading about this a long time back, and the operative phrase is that employees of a traditional company “look up to their bosses and have their arse facing the customer”! Air India can easily be described such, I presume.
I wonder what was the handling of the passengers in this recent AI flight:
Agree with your observations.
PSU employees need orientation. All employees say that they are overburdened with work. They why their efficiency is very low. See the difference between SBI and ICICI Bank.
One more thing is the Government itself is not very keen in the growth of PSUs. One example is Tamil Nadu is Aavin. Its milk is high demand in market. But they are not interested in provide more to satisfy the customer. Then how the growth will come?
The biggest issue with Air India is its route structure. AI needs to adopt a hub and spoke route structure with increased frequencies. This would allow much more flexibility for passengers, with some loss of convenience.
For example. Air India Express from Dubai to Khozikode will have a tough time attracting high yielding passengers away from Emirates and Etihad. Instead, it gets stuck catering to lower yielding passengers with a narrowbody aircraft (with high unit cost). This is an instance where AI would be better off cancelling the direct flights and accumulating passengers from several destinations at a hub and flying them on wide bodies. In this example, Bangalore would be a great hub for Kerala, Tamil Nadu, Karnataka. Passengers from Calicut, Trivandrum, Cochin, Coimbatore, Chennai, etc. could transfer at Bangalore for regular flights to the Gulf. This would allow for several flights a day to each destination in southern India and several flights a day from Bangalore to every destination in the Gulf.
Would some be bothered by the loss of direct flights? Sure. But now AI would be compensating by offering the same level of service as Emirates on the Bangalore-Dubai run (with a 787). And frequent connections for short hops domestically.
The hub-spoke strategy results in dramatically better utilisation of AI’s fleet. 787 won’t be flying inside India. They’ll be targeting international flights with fewer frequencies and more passengers. The Airbus A321s would be focused on flying between hubs. And the A319s, A320s and B737-800s, would be focused on flying spokes with the aircraft sized according to demand for time slots.
The strategy allows AI to offer better service and better flexibility. It also concentrates more employees at a few key hubs: Delhi, Mumbai, Bangalore, Kolkata.
Heck, the bhabus should like this strategy too. Increases the chance of them being upgraded. Not much chance of upgrade on 787 flying Delhi-Bangalore. Much more on a A321. Likewise, no business class on any Air India Express flight (say TRV-DXB). But there will be business class from any hub on international routes.
The extra employees would also then be much more utilised. Each hub and each spoke would see many more flights due to higher frequencies. Much more work. Improved productivity.