Arvind Jadhav, Chairman and Managing Director of AIR INDIA:
Man With A Clear Mission

Flag carrier Air India improved its passenger load by over 10 percent and reduced costs in 2009 by deploying new aircrafts and rationalizing routes, Arvind Jadhav, chairman and managing director of AIR INDIA, said in an exclusive interview with NRI Today during a brief visit to New York last month. He said, induction of 29 aircrafts and enhanced utilization of the fleet helped the carrier phase out 11 old aircrafts. “By March 2010, three more Boeing B-777-200s, two Airbus A-310s and eight Airbus A-320s shall be returned or retired from the fleet as a part of this exercise,” Jadhav added.

Mr. Arvind Jadhav, Chairman & Managing Director, NACIL and Mr. Fred P. Hochberg, Chairman & President, Export-Import Bank of the United States

These and other measures would help the carrier save Rs.378 crore through cost reductions during the winter schedule and Rs.563 crore for the entire year, Jadhav pointed out. Besides route rationalization, Air India withdrew from sectors like the India-Gulf routes and transferred these to the Air India Express, its low-cost carrier to improve profitability.

Jadhav was in New York to ink a contract with US Exim Bank. The Export-Import Bank of the US and the National Aviation Company of India Limited, the holding company of national carrier Air India, signed an agreement worth $1.1 billion to support financing of sale of Boeing airplanes to the Indian carrier.

The financing will support the sale of Boeing B777-200LRs and B777-300ERs to be operated by Air India and B737-800s to be operated by Air India Charters, the Exim Bank said.

These purchases represent the third phase of Air India’s 68-aircraft fleet renewal plan. Exim Bank had earlier approved $1.2 billion in 2007 and $548.8 million in 2008 to support the financing of NACIL’s purchases of Boeing aircraft.

At a ceremony held at Exim Bank headquarters, the financing documents were signed by Exim Bank chairman and president Fred P Hochberg, Arvind Jadhav and JPMorgan Chase & Co (New York) head of Global Structured Trade Finance, Astar Saleh. The joint secretary and financial adviser to the civil aviation ministry, Bharat Bhusan was also present.

“This support has enabled Air India to raise finances for acquiring latest technology aircrafts at competitive rates of interest compared to commercial financing,” Jadhav said. The transaction represents the second partial conversion of two Exim Bank preliminary commitments to final commitments.

The final commitments were approved by the Bank’s board in June 2009. The Bank is guaranteeing loans extended by JP Morgan Chase & Co, a statement said.

“The fast-growing Indian market continues to offer enormous opportunities for US exporters in many sectors, including transportation,” Hochberg said. “Air India, as one of Exim Bank’s largest customers, plays a major role in this very important trade relationship,” he said

When this writer asked him of what he “brings to the table to solve the many problems Air India faces,” Arvind Jadhav, who is described as a tough, no-nonsense, go getter — a rare quality in a government bureaucrat and whose admirable work while serving the Power Sector of India brought him to the notice of no less than the Prime Minister himself, narrated his proven track record of dynamic and decisive action and producing results.

Jadhav assumed responsibility in the backdrop of falling market share of Air India and when it is going through a major fleet expansion program, inducting 111 new Boeing and Airbus aircrafts over the next few years.

The government of India appointed Arvind Jadhav, a 1978 batch Indian Administrative Service (IAS) officer, as managing director and chairman of Air India in May this year. Jadhav will serve for a total of period of three years.

Before assuming office, he was previously principal secretary infrastructure development for the southern Indian state of Karnataka. Before his stint in Karnataka, he was with the central government as a joint secretary in the power ministry. Jadhav has also served as central vigilance officer with Gas Authority of India. The new Air India chief holds postgraduate diplomas from the Indian Institute of Foreign Trade and the Italian Institute of Foreign Trade, Rome.

One of the challenges Air India faces is completing its merger with its state-owned sibling Indian Airlines. Air India also faces stiff competition from privately owned Indian carriers, which have been winning market share.

Jadhav had played an active role in introducing the public-private partnership (PPP) model to develop the Bangalore International Airport Ltd, a greenfield airport project. Managing an airline, Air India’s chairman and managing director, Arvind Jadhav, 53, also has to deal with recalcitrant unions and displeased employees.

He said Air India is not only an airline operating flights between cities but is a multifaceted organization engaged in air transportation, cargo, ground handling and engineering MRO. The infrastructure it has created over the years and its experienced manpower, provide ample opportunity to stand up to the challenges in the aviation industry, he said.

Among his plans for the national carrier, Jadhav said Air India was looking at using the cargo service and the maintenance, repairs and operation (MRO) facility to increase its revenue.

Air India, the national carrier after its amalgamation recently, has been going through difficult times as is being experienced by the entire aviation industry. “We have also been hit by global recession, collapse of financial institutions, skyrocketing fuel prices, high input costs at airports apart from the cost of an ageing fleet,” he admitted.

Jadhav said that AI was in a debt trap. Its net worth is slowly but surely, getting eroded. To add to this, he found an “organization where people felt nothing has gone wrong” and “that they were doing their best.” He said, “Admitting that we have a serious problem is the starting point,” and added that, AI needs to take concrete measures to overcome them.

However, he has plans. He is a man with a clear mission: “Turning around an airline that is steeped in losses, deep in debt, under the intense scrutiny of the government and media.” In addition to reorganization of the staff, whose morale is already very low in Air India, Jadhav intends to focus on marketing. He says, “We are an organization where hardly any effort is put into marketing. I have asked my staff to focus on getting the maximum yields.”

In all these, Jadhav says, his biggest priority has been “cutting costs. We have to look at every nook and corner, every square inch of space, every minute of our time. My revenues are Rs 14,000 crore and my costs are Rs 19,000 crore. I need to cut costs to the magnitude of Rs 6,000 crore annually. It is not that I can raise fares and increase revenues overnight. I can’t simply raise the tariffs.”

The carrier launched a massive replacement program when in December 2005 it placed an order for 111 aircraft which comprised 68 Boeing and 43 Airbus aircrafts to replace its ageing fleet and withstand the competition from international players as well as on the domestic turf. This was the largest order placed in civil aviation history out of India for the national carrier.

The orders were placed when the markets were buoyant and the civil aviation industry in India was reaching new heights in terms of growth of domestic traffic. The fuel shock of 2008 which was followed by the sub prime crisis threw the world economies out of gear and brought air travel to almost single digit /negative growth in so far that the aviation industry witnessed losses of 16.8 billion in 2008 and is likely to witness another 11 billion in 2009 , as per IATA statistics. This set the entire industry in reverse gear and airlines started canceling aircraft orders or deferring them to a later date for demand to pick up. As compared to industry phenomena Air India’s cancellation/ deferment of the orders placed has been minimal if not “nil” till date.

Air India was not immune to these shocks and with the assistance of the Government has started several initiatives towards cost reduction and revenue enhancement aimed at reducing the cost platform. AI has received active support of Government of India in considering the carrier’s request for equity induction and the first phase of induction of Rs 8000M (US$180 M) is likely to be received shortly out of the total assistance asked for of Rs 50000M (US $ 1.1 billion). The Government is also closely monitoring the performance in several areas of the airline activity in so far as a Group of Minister including the Finance Minister would take frequently reviews of the airline’s performance. The Company is also in the process of bringing about an operational restructuring within itself and empower its SBU heads to achieve maximum revenue in their area of activities. With such stringent measures of corporate governance in place, Air India is confident of emerging stronger in the years to come and to recoup its pristine glory.

Air India has so far inducted nearly 35 new Boeing and 35 new Airbus aircrafts in its fleet since Nov 2007 involving a capital outlay of nearly US$ 5 billion. By far this is the fastest induction, which any carrier can undertake in such a short span of time. The aircraft inducted have been deployed on its prime routes both on the domestic and international sector.

These latest state of art technology aircrafts have been well received in the market and have set up new benchmark of performance especially those on the long haul routes. The non stop premium flights provide one of the finest products to the travelers and the shortest time taken to travel between India and the US.

A passenger can dine in India and have breakfast in New York on the next day early morning and return on the same day to India after finishing his work or catch his connections anywhere in the US. The evening return flight provides a convenient connection to Delhi and Mumbai for passengers within the US.

Recently AI has extended the non stop services from Delhi to Washington through JFK. This flight has been well received in the markets and would provide a convenient service to several officials working in IMF, World Bank, High Commissions in Washington to travel to India.

The induction of the Dreamliner 787 by Air India in 2011 will be another landmark in the national airline’s history as it would be the first airline in the region to introduce this aircraft. AI is looking forward to consolidate its position in the US and is also critically assessing various points wherein it can expand its operations once the Dreamliner joins the fleet.

Chitra Sarkar, Executive Director of Air India for Americas and Europe, said, “AIR INDIA, which has been in operation since 1932, currently offers non-stop daily flights to Mumbai and Delhi from JFK International Airport20in New York, plus direct service from Liberty International Airport (Newark), O’Hare International Airport (Chicago) and Toronto. Others cities that have services by Air India are San Francisco and Los Angeles, both served via code-share operations.” And she went on to add. “We want to expand even further enabling passengers to fly Air India from several other North American cities. In the very near future, we hope to start flying from Washington DC, Los Angeles, and Houston or Dallas.”

“The fast growing Indian American community and the economic cooperation between India and the United States offers Air India great market growth in the coming years,” said Mrs. Sarkar. “Recognizing this, Air India seeks to provide service that is fast and convenient, with all the amenities and comfort today’s travelers demand. And we want to bring back the glory days of Air India.” The first, second and the third generation Indians in the US and the ever growing business and tourism based travelers to India give hope to the airline industry that “there is room for everyone.” Mrs. Sarkar, while striving to win the hearts and minds of the passengers, wants to have cooperation with other airlines, especially those from India that have recently started international services.

Passenger comfort has been given utmost importance, while planning expansion. Sarkar said, “I am confident that Air India will continue to be the best in the India-bound US market in the years to come.” For details and reservations, see your travel agent or contact AirIndia at 1-800-223-7776 or visit www.airindia.in.

- [ Ajay Ghosh ]