Air Transport World

Up and running.(Company Profile)

Indian Airlines, having turned the corner on 8 years of losses, looks to government divestment and fleet renewal as keys to success

MUMBAI-Indian Airlines is up and running. For the time being, at least. After eight straight years of losses, the airline finally turned the corner in fiscal 1998, ended March 31, and reported a net profit of $11.5 million.

The mood within the airline is optimistic but touched with caution. It was reflected in Chairman P. C. Sen's remarks to ATW in Delhi: "We are not by any means out of the woods," he said. "Our recovery is still very fragile. Much will depend on the economic conditions and how the traffic grows."

His caution is understandable. The Indian economy has been affected by the east Asian financial crisis. The rupee has slipped to 42.5 to the U.S. dollar after being steady in the 3 5-36 range for a couple of years.

Meanwhile, India's traffic has been negative. After reaching 11.98 million passengers a year in 1995, it dropped to 11.91 million in 1996, and went down further to 11.51 million in 1997. At the same time, Indian s own traffic declined from 7.7 million to 6.4 million. The average number of passengers carried per day has fallen from 26,000 to 21,000.

In retrospect, the defining moment for India's domestic carrier, at least in its recent history, came in February, 1990, when one of its newly acquired Airbus A320s was involved in a fatal accident at Bangalore, in which 90 people were killed. Fifty-six survived the accident. As a result of the ensuing public outcry, the Minister of Civil Aviation, Arif Mohemmed Khan, ordered the grounding of all 14 A320s that had been received.

While the case for grounding was based on dubious reasons, the fleet remained firmly on the ground for the next 40 weeks. At one time, the government even considered asking the airline to sell off or at least to lease out some of the planes and cancel the rest of the order, though nothing was wrong with the aircraft. Deputy MD N.C. Ghosh, who as finance director previously had the tough job of shoring up crumbling finances, is convinced that there was no reason for the grounding. "Our present profitability is on account of the A320," he declares. "Had the aircraft not been grounded, we would have broken even in 1989-90, instead of making a net loss of $7.8 million."

In any event, the Gulf War later that year provided a welcome opportunity to rehabilitate the aircraft by flying Indian workers out of Kuwait and Saudi Arabia. In December, 1990, the A320s were put back in domestic service. What is important is that the aircraft have become the workhorses of the airline.

This prolonged grounding in effect sent the airline into a fairly rapid financial decline, accentuated by other factors. The airline's nearly 40-year monopoly status was broken in 1990, when the government took the first tentative steps to open up the domestic market to private carriers. The result was a substantial loss of market share by Indian. …

Log in to your account to read this article – and millions more.