AI’s ‘Dreamliner’ nightmare: $4B order, no homework

Given the mess at home, flag carrier can thank its stars Boeing has not delivered on time

sweta-ranjan

Sweta Ranjan | May 25, 2011


Dreamline 787
Dreamline 787

The truth should at last come out as the beleaguered state-run carrier has finally decided to do the reality check on the order it placed in 2006 for 27 Boeing 787 Dreamliners worth almost $4 billion. Deep in red, Air India has now woken up to consider if the order was really needed.

AI has set up a panel this week, chaired by the civil aviation ministry's financial adviser and DGCA chief Bharat Bhushan, to study if the airline really needed the Dreamliners and compensation it should get from Boeing for the three-year delay in the aircraft delivery. Besides the compensation demand (once estimated at $840 million), the panel may also suggest whether the national carrier should cancel the order altogether.

Read the latest issue of Governance Now to find out how mismanagement at AI has virtually killed the national carrier: Murder of the maharaja

While there are questions raised over the delay by the Boeing, the AI management should also be questioned if they are prepared to take the delivery of the aircraft. Experts believe that the delay in the arrival of the Dreamliners should be seen as a blessing in disguise for AI. What would have been the fate of the national carrier if the most-sought-after aircraft were delivered on time?

No doubt, these fuel-efficient aircraft will help the cash-crunched national carrier reduce costs of the long-haul operations, but there are plenty of questions that need to be answered.

Question 1:  The first and the foremost preparations before receiving the 787 should have been the route management. Has the management worked on the route operations if Dreamliners are received?

The expected answer is ‘No’. An Air India official, requesting anonymity, said that the AI has just been showing the other side of the story to the world but in reality it is not prepared. He said, “Prior to the delivery of the 787, the management should have worked extensively on their route management. Our decision for the demand of the compensation from Boeing due to delay is justified but we are also not clear which new sectors it should operate,” says the official.

Question 2: If the delivery was done on time, how would the debt-ridden company have managed to financially sustain its operations?

Sources say that for the cash-strapped AI the delay in delivery is a boon as it would not have been able to manage its financial situation. With the induction of the most modern aircraft 787 it would have bled further. An aviation expert said, “If the Dreamliners were delivered on time the management would have to start operations to new sectors and everybody is aware that new sectors, at the initial stages, don’t make money. It would have been almost impossible to mange new sectors.” Air India today is staring at a loss of over Rs 13,000 crore and the management is struggling to operate daily services. The Comptroller and Auditor General of India (CAG) says Air India incurred Rs 10,000 crore losses because it was forced into buying 111 aircraft it did not need. The CAG says the mega acquisition is the main reason why the Maharaja is in deep financial mess.

The national carrier has a debt of Rs 40,000 crore, of which Rs 18,000 crore is working capital loan and the rest is for aircraft purchase. Along with accumulated losses of Rs 13,000 crore and dues to vendors of Rs 4,000 crore, the airline is finding it hard to pay anything at all.

Question 3: If the Dreamliners were delivered on time would the merger mess have not affected the operations?

It is well known that Air India is repenting over the merger decision. Erstwhile Indian Airlines pilots’ strike recently is undoubtedly fallout of the merger of Air India and Indian Airlines. The pilots of the erstwhile Indian Airlines and Air India are still treated separately – as if they belonged to two different entities. With the introduction of 787 the drift between the two groups of pilots would have widened. Jitendra Bhargava, former executive director of Air India, says, “The (original) Air India pilots would claim their first right on the Dreamliners and would not like to lose the opportunity to fly the most modern aircraft. Hence it would have accelerated the clash between the pilots groups. These are HR issues that need to be sorted out before the delivery of the aircraft if AI wants to operate smoothly.” He believes that the Dreamliners order was apt if Indian Airlines and Air India were not merged. 

Question 4: Has the Air India management worked on the team management before the arrival of the aircraft?

B-787-800 can seat 210 passengers and are made of composite materials making it lighter. They, therefore, consume 20 percent less fuel than other aircraft. Air India plans to deploy them on long-haul sectors for non-stop operations but the authorities have paid little attention to the team management. Training of cabin crews, pilots and the engineers was the first thing that the management should have organised by now. Every aircraft requires seven sets of pilots (a commander and a co-pilot in each set) but AI is not ready to manage the operations of Dreamliners because the training of the pilots for flying 787 is yet to happen.

The recent case of Air India’s chief of training, Stefan Sukumar, a foreign national, undergoing training in Singapore for flying on Boeing 787 Dreamliner, created a lot of controversies. Both the ministry and the Directorate General of Civil Aviation had instituted an inquiry as he hadn't been hired to be a pilot. AI’s decision to send Sukumar for training had deprived a fully-qualified Indian pilot to receive training on the Boeing’s new version.

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