AI passing through critical phase, CMD tells employees

Text of Arvind Jadhav's letter written on Thursday

sweta-ranjan

Sweta Ranjan | June 16, 2011



While the beleaguered Air India is soon to witness a mass exodus of its most dedicated lot of pilots and agitation against non-payment of salary, the national carrier's Chairman and Managing Director Arvind Jadhav has tried to come clean once again by writing a letter to its employees, primarily pilots. The CMD in his letter of Thursday has explained the reasons for delay in the salary and has also given details how deep-in-red is Air India.
The CMD agrees that the situation of the company is crippled and it is finding it difficult to sustain. The letter reads, “You are well aware that Air India is passing through a very challenging and critical phase. Increasing debts, mushrooming interest burden and increasing fuel costs are financially crippling the company. It is becoming difficult to sustain our operations without cash flows and revenue generation.”
In the letter Jadhav has given explanation for the deplorable condition of the company. For hand-to-mouth existence of the company he puts the blame on recent strike by the pilots, “The company’s difficult financial situation has led to banks, financial institutions, vendors and suppliers asking for higher costs to cover credit risk. The low cash position over the past few years saw Oil Marketing Companies putting Air India on ‘cash-and-carry’ since December 2010 – which is hurting our normal operations. The recent strike and consequent huge losses to the tune of Rs 250 crore forced the company into a hand-to-mouth existence and the lesson we need to take is clear: Disruptions would only damage our ability to generate revenue.”
Jadhav has requested the employees to continue supporting the management even after receiving no salary. He writes, “The management does understand and appreciate your difficulties, arising out of salaries not being paid on time. We understand and share your / your family difficulty of being unable to meet commitment. But you must be aware that your management has not left any stone unturned to convince the Ministry of Civil Aviation, Government of India and the Financial Institutions about the dire need to infuse more equity – without which it would simply not be possible to implement the Turn Around and Financial Restructuring Plan.”
The CMD has requested each employee to provide support in the turnaround and rebuilding of the company. The letter reads, “Since it is not possible for every individual to be actively involved in the turnaround implementation process, I call upon each of you to religiously follow and implement the 10:10:10 mantra of improving efficiency, eliminating wastage and improving revenues. Colleagues in the marketing, sales, passenger terminal, ramps, reservation, check-in, cabin crew and pilots should all put in their best foot forward so that we are able to redeem ourselves in the near future.”
In the long letter written by the CMD he also shares the progress made on Air India Board. He writes,
“ 1. As required by Reserve Bank of India, a consortium of Banks under State Bank of India has been formed.
2. Business Plan finalised after reiteration and vetting by M/s Deloittee as stipulated by RBI. Financial Restructuring Plan (FRP) prepared by SBI Caps.
3. Submission of Business Plans to Ministry of Civil Aviation for operationalisation of Engineering and Ground Handling subsidiaries.
4. In principle clearance of FRP by the Consortium of Banks
5. The Justice Dharmadhikari Committee has held meetings and has invited suggestions.”
 
The CMD also warns the employees to not to succumb to rumour mongering and grapevine. He writes, “the only antidote to rumour mongering is to do your job / task sincerely and with devotion so that we can justifiably challenge competition. Despite the challenges and negative media attention, the competition even today feels insecure of Air India.”
The letter:
Dear Colleagues
Greetings
You are well aware that Air India is passing through a very challenging and critical phase. Increasing debts, mushrooming interest burden and increasing fuel costs are financially crippling the company. It is becoming difficult to sustain our operations without cash flows and revenue generation.
But there is hope. Hope in the form of our esteemed passengers, who – despite being aware of our innumerable challenges – have not left or deserted us. Their faith, confidence and their patronage of Air India has never diminished. Rather, it has only strengthened. This is evident in the immediate aftermath of the recent strike, when their support saw Air India achieve over 82 % passenger seat factor.
 
This is what we need to appreciate, respect and nurture in the days to come. Nurture, we have to because it is their sustained patronage which would propel our other efforts, including turnaround & financial restructuring plan, to come out of the current difficult times. We need to retain our customers. So each one of us – every section, every department: particularly the commercial, marketing and customer care – must go the extra mile to provide customer delight. Being courteous and sensitive to all customers should be top most priority.
While being courteous to our customers / passengers, we also have to give the same priority to our efforts to increase revenue, eliminate wastages and improve efficiency – at every level. For our passengers and to respect their overwhelming support, we must strive and ensure that On Time Performance (OTP) is sacrosanct. Nothing less than 90 % OTP every month is acceptable.
Meanwhile times have changed. The company’s difficult financial situation has led to banks, financial institutions, vendors and suppliers asking for higher costs to cover credit risk. The low cash position over the past few years saw Oil Marketing Companies putting Air India on ‘cash-and-carry’ since December 2010 – which is hurting our normal operations. The recent strike and consequent huge losses to the tune of Rs 250 crore forced the company into a hand-to-mouth existence and the lesson we need to take is clear: Disruptions would only damage our ability to generate revenue.
The management does understand and appreciate your difficulties, arising out of salaries not being paid on time. We understand and share your / your family difficulty of being unable to meet commitment. But you must be aware that your management has not left any stone unturned to convince the Ministry of Civil Aviation, Government of India and the Financial Institutions about the dire need to infuse more equity – without which it would simply not be possible to implement the Turn Around and Financial Restructuring Plan.
On their part, the MoCA, GoI and FIs have been seeking from us improved achievements vis-a-vis our flight operations and customer service. Clearly, we have to ensure that our flights operate efficiently, customers are looked after and we are appreciated for our sincerity, commitment and devotion. Which brings me back to reiterate that we all have to actually woo and delight our customers?
Since it is not possible for every individual to be actively involved in the turnaround implementation process, I call upon each of you to religiously follow and implement the 10:10:10 mantra of improving efficiency, eliminating wastage and improving revenues. Colleagues in the marketing, sales, passenger terminal, ramps, reservation, check-in, cabin crew and pilots should all put in their best foot forward so that we are able to redeem ourselves in the near future.
Let me also share with you the progress made on Air India Board approved TAP and FRP:
1. As required by Reserve Bank of India, a consortium of Banks under State Bank of India has been formed.
2. Business Plan finalised after reiteration and vetting by M/s Deloittee as stipulated by RBI. Financial Restructuring Plan (FRP) prepared by SBI Caps.
3. Submission of Business Plans to Ministry of Civil Aviation for operationalisation of Engineering and Ground Handling subsidiaries.
4. In principle clearance of FRP by the Consortium of Banks
5. The Justice Dharmadhikari Committee has held meetings and has invited suggestions.
 
Unfortunately, the very nature of this organisation leads to lot of rumour mongering and grapevine. Do not succumb to such talk and the only antidote to rumour mongering is to do your job / task sincerely and with devotion so that we can justifiably challenge competition.
Despite the challenges and negative media attention, the competition even today feels insecure of Air India. They fear Air India would be able to secure its rightful position. Clearly we all can do and achieve this.
 
And please do not expect anyone to single-handedly do every task. I also do not expect you to be told about your job. You are well aware about your responsibilities and capability. Involve yourself, commit yourself to work and prepare yourself for major restructuring that is bound to happen. Start aligning yourself to the company’s impending requirement as well as the challenge of the competitors. Otherwise, there could be a need to cull out the dead wood or the wood that is unwilling to respond.
 
Finally, though we tried our best, I am sorry that your salary statement could not be released on 8th June. However, with help from the Government, we have got the funds released and your salaries would be credited to your accounts soon.
Let's work together to ensure such incidents become history.
Yours truly
 
(Arvind Jadhav)

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