Air India Flails
By Sofia Liska
Jun. 12 – Despite India’s rapid economic growth, conflicts and cultural norms continue to prevent further progress. In this case, Air India’s profits and reputation are the victims of pride. Two disputes have delayed an order of Boeing 787 Dreamliners, which remain in the U.S. state of Washington ready to fly to India.
The first dispute involves a disagreement between the Indian government and Boeing over how high a penalty Boeing ought to pay for the manufacturing delays in India’s 27-plane order. The Indian government has demanded US$1 billion, but will only receive a fraction. The planes are now ready, but cannot be sent until India’s Cabinet meets next week to approve the deal.
“India’s airplane is ready,” Dinesh Keskar, a senior vice president for sales at Boeing, told the New York Times. “We are waiting to give it to them.”
The second dispute preventing the Dreamliners from going airborne is between the pilots of Air India and Indian Airlines – two state-owned airlines that recently merged. Pilots from both companies want to be the first to fly the new planes. Original Air India pilots argue that because the planes were purchased before the merger, only those who were working for the original Air India at the time should fly them.
However, Air India, in an attempt to be diplomatic, sent 32 pilots from each company to Singapore in order to train on the Dreamliner, angering other pilots and inspiring a massive strike that began May 7.
Though the merger was meant to form an airline carrier large enough to challenge those of other countries, it has instead backfired and hurt India’s reputation in the same way that the poor organization of the Commonwealth Games did. Pilot strikes, poor service, and safety concerns have turned Air India into a secondary choice next to the numerous other domestic and international options.
Worsening the company’s reputation, an Air India jet lost a nose wheel on Sunday during a takeoff with 52 people aboard the plane. Luckily, there was no major damage and no one was injured.
“In hindsight, I can say that the merger didn’t work out,” said Ajit Singh, India’s Minister of Civil Aviation.
The government agreed this year to give the airline a $5.4 billion bailout as long as it met certain financial milestones.
“That’s why the strike came at such an inopportune time,” Mr. Singh said. “This is the public’s money.”
Mr. Singh recently fired 101 of the 400 striking pilots and is in the process of hiring new ones. All Air India flights to Hong Kong, Osaka, Seoul and Toronto have been cancelled due to the strikes, weighing heavily on company profits.
Though K. Swaminathan, an Air India spokesman, estimates that operations will be back on track within three or four months, this depends greatly on the success and efficiency of the new Dreamliners.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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