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| Vol. 4, Issue 5 May 2012 |
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Reporting & Essays |
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Reportage |
Tailspin
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| Praful Patel and the fall of Air India |
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Published : 1 December 2011 |
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SIPRA DAS / THE INDIA TODAY GROUP / GETTY IMAGES |
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| Praful Patel (left) with NCP leader Sharad Pawar, welcoming a new Boeing jetliner to the Air India fleet on 28 July 2007.
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T AROUND NOON on 28 July 2007, Air India’s newest plane descended from the silver cotton clouds of a pale monsoon sky, escorted by a pair of Indian Air Force fighter jets. In the Technical Area at Delhi’s Indira Gandhi International Airport, where dignitaries usually gather to greet visiting heads of state, the roar from the engines of the Boeing 777-200LR |
was met with euphoria by the assembled VIPs, including Prime Minister Manmohan Singh. “I take pride in the fact that our government has taken steps to bring to an end a long period of neglect of our national carriers,” Singh announced proudly. “I compliment my colleague Shri Praful Patel and the present leadership of Air India and Indian Airlines for their important forward looking and innovative role.” For Patel, the minister of state for civil aviation, it was a moment of triumph, and he stood beaming in a pearl-white kurta-pyjama, feeling every bit like the tallest man on the dais.
Designed for long-haul intercontinental travel, the Boeing 777-200LR is an imposing sight, 209 feet long and 212 feet from wingtip to wingtip. The arrival of this particular aircraft, which had flown nonstop to Delhi from the Boeing plant in Seattle, was rich with symbolic significance for Patel’s tenure, reflecting two of his major initiatives for Air India. It was among the first of the Boeing jetliners that had been ordered under Patel, part of an enormous purchase of 111 aircraft placed in 2005 at a total cost of  450 billion. It was also sporting the brand new logo and livery designed to reflect the planned merger of Air India and Indian (formerly Indian Airlines), which had been initiated by Patel in 2006 and cleared by the cabinet in March 2007: a red flying swan morphed from Air India’s “Centaur” logo, incorporating the stylised Konark Temple Sun Chakra of Indian. Within a few days, the 777 would be flying nonstop routes to the United States, making Air India the first domestic operator to do so—another one of Patel’s priorities for the national carrier.
Flanked by his party colleague Sharad Pawar—the chief of the Nationalist Congress Party (NCP) and the minister for agriculture—and the deputy chairman of the Planning Commission, Montek Singh Ahluwalia, Patel used his speech at the ceremony to ask the prime minister to support another large aircraft purchase. “If we have to look ahead for growth, we will have to revisit the entire fleet requirement. I will urge the government and the prime minister to look into this aspect,” Patel said, exuding the confidence of a man who saw himself as a reformer of the skies—who opened up India’s cosseted aviation sector 15 years after Manmohan Singh had done the same for the Indian economy. He announced that he would soon submit a request to buy another 60 planes—for about 280 billion—and declared that the aviation sector would create two million new jobs in the next decade.
In 2007, Air India was celebrating its 75th anniversary, and the arrival of new aircraft was cause for further celebration—the first upgrade of the airline’s antique fleet in more than a decade. The only damper on the festivities was the absence of the eight unions representing the employees of Indian, who boycotted the ceremony to protest the decision to merge with Air India. But Patel, always adept in his dealings with the media, waved the issue aside with a blanket assurance that “the interest of the employees” would be protected. He liked to think of himself as a real doer—a quick and efficient man of action, a sharp and successful businessman in his own right—and he had unquestionably shaken up the national carriers and the aviation sector in a few short years on the job. In his own speech, the prime minister lavished praise on Patel’s achievements: “The aviation environment in our country has recorded a sea change over the last three to four years and I complement my colleague Praful Patel for this contribution to this happy outcome.”
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HE SENSE OF JUBILATION would prove to be short-lived. By 2009, Air India had plunged into a dire financial crisis, caused in large part by the two initiatives celebrated on that July afternoon: the oversized purchase of new aircraft and the merger of the two national carriers. The company formed by the merger of Air India and Indian, NACIL (National |
Aviation Company of India Limited), had posted losses of 22 billion in 2008 and 55 billion in 2009, along with a debt burden of 160 billion. Staff salaries for June 2009 had been delayed, and the airline’s chairman and managing director (CMD), Arvind Jadhav, requested in August 2009 that senior officials forgo their salaries while the airline sought government aid.
Various employees’ unions had begun to write angry letters to the prime minister, pointing the finger at the aviation ministry for the calamitous state of Air India. In a letter dated 13 July 2009, the All-India Airlines Retired Personnel Association accused Patel of having “single-handedly and systematically stripped the two national carriers—AI and IA—and brought them to brink of bankruptcy by a series of well planned out maneuvers, which we have only now been able to comprehend and unravel. All along, all these actions have been cloaked under the garb of unleashing India’s civil aviation potential, even as they struck at the very root of AI’s and IA’s existence.” That same month, the government formed the first of what would be many such committees, this one headed by the Cabinet secretary, to devise a plan for restructuring the airline within 30 days.
In his August 2009 Independence Day address from the ramparts of the Red Fort, on a day when history and symbolism fly high along with the tricolour, Singh attempted to assure the country that the government would not abandon the flag carrier it had nationalised in 1953. “We are giving careful attention to the problems of Air India and will resolve them soon,” he said. Patel, for his part, remained unfazed. When journalists contacted him seeking a reaction to Singh’s Independence Day speech, his response was calm and detached, as would remain the case for the duration of his tenure at the aviation ministry: “I am happy that Air India has found mention in the prime minister’s Independence Day address, which shows the priority being accorded to Air India by the government.”
| PRAKASH SINGH / AFP PHOTO |
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A month earlier, Patel had been cornered in the Rajya Sabha by a battery of non-Congress parliamentarians, who used the time allotted for “calling attention” to launch a series of allegations against the ministry: that the merger had been misguided, mismanaged and not approved by Parliament; that the 2005 aircraft purchase order had been conducted hastily and without due diligence; that the airlines—which had both posted profits in 2003, 2004 and 2005—had begun making enormous losses even before the onset of the global recession; that private domestic and international carriers had received preferential treatment from the ministry; and, most damning, that “middlemen” and corruption had influenced the making of aviation policy.
Amid the welter of what he called “insinuations flying here and there”, Patel emerged more or less unscathed. He calmly ignored some of the more fervid accusations, and concentrated on what has since become a well-worn narrative to explain the airline’s declining fortunes: the government had rightly “liberalised the aviation sector keeping in view the rapid increase in the demand for both domestic and international air services”. The advent of increased competition, Patel argued, had naturally diminished the market share of the national carriers; the decision to upgrade the fleet was long overdue, and necessary to meet the challenges of increased competition. The global economic downturn, he said, had damaged the fortunes of airlines around the world, and Air India was no exception. The massive order of planes had been necessary (“how can you operate an airline with older aircraft which are 15 or 20 years old”) and based on projections made by the management of Air India and Indian Airlines. (“There is a well laid down process in government for acquisition. It does not happen overnight just because a few people in Air India decided it, or, a file came to the minister and he was in a rush to buy aircraft.”) The same was true of the merger: “A world-class consultant was appointed,” Patel said, “and presentations were made to the management as well as to the ministry.” Besides, Patel suggested, there was no evidence that the airlines would have fared better unmerged: “Do you mean to say that a stand-alone Indian Airlines or a stand-alone Air India would have been able to compete in the global air space?”
This brief dust-up in the Rajya Sabha would not be the last time that Praful Patel faced criticism over his tenure as aviation minister and confronted accusations that he had failed to protect—or even harmed—the national carrier. His defence would remain much the same, buttressed by the undeniable reality that competition had benefited the consumer (according to government figures, domestic passenger traffic rose from 11 million in 2003 to 51 million in 2010), and the unquestioned implication that the very same competition would inevitably reveal the weakness of the aging state-owned airlines. As he put it in the Rajya Sabha: “If every issue of connectivity or people’s aspiration cannot be met only by the national carrier, this role will have to be performed by others also. This is a fundamental decision taken by the government. Everybody has accepted it since 1993 onwards. This is the process of liberalisation.”
As Patel surely knew, in the new India, eager to shed its socialist past, the proverbial inefficiency of a public-sector enterprise was a reliable running joke, sure to keep the country in good humour. Apart from the employees’ unions and a handful of politicians eager to score points against the ruling coalition, there was precious little sympathy for Air India; the link between the modernisation of the economy and the erosion of traditional loyalties is not a faint one. As Patel himself had observed during the Rajya Sabha debate, Air India and Indian Airlines had always made money for the government rather than taking money from it, but with the losses mounting higher and higher, pundits and television anchors began to ask why the government was still in the aviation business. The former Hindustan Times editor Vir Sanghvi posed this very question to Patel on CNBC in April 2010: “Why don’t you just privatise it?” Referring to himself in the third person, as he often does, Patel laughed and replied: “You lived long enough in Delhi and you know Praful Patel alone can’t take that decision.”
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FTER THE 2004 GENERAL ELECTIONS, Patel was named minister of state for civil aviation—one of three ministers from the NCP, then the fourth-largest member of the ruling United Progressive Alliance (UPA) coalition. He took to the ministry like a fish to water: confident, comfortable and knowledgeable from day one, unlike some of his predecessors at Rajiv |
Gandhi Bhawan. The NCP had lobbied to place Patel atop the aviation ministry, and he knew he’d landed the portfolio before the cabinet was announced. “He had even told the media before it was official,” a former aviation ministry official told me.
| INDRANIL MUKHERJEE / AFP PHOTO |
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Praful Patel with Boeing’s Alan Mulally (left) and Air India CMD V Thulasidas in Mumbai after signing the deal to purchase 68 Boeing aircraft on 11 January 2006. |
“I have seen this sector from close enough,” Patel told the Business Standard in an interview two weeks into his tenure. “Besides, my business and corporate background help me understand what the private sector wants. These will be my assets here.” Patel was undoubtedly familiar with the aviation sector: he had served on almost every Parliamentary Consultative Committee on Civil Aviation for the past 16 years. At a press conference on 2 June, eight days after arriving at the ministry, he announced a raft of initiatives, including the launch of a low-cost subsidiary of Air India, the leasing of new aircraft and the creation of a new civil aviation policy by the end of the year. Noting that India had only 150 civil aircraft—compared to 650 in China—he declared, “We need to expand and quickly.” The Air India and Indian Airlines boards had each already approved proposals for a long-delayed aircraft purchase, but Patel indicated that he planned to take “another look” at the acquisition plans. “I will talk to them and if their decisions are right, let them go ahead with their proposals,” he said. “My main aim is to strengthen both the airlines.” He looked every bit like a man in a hurry.
Air India and Indian Airlines were certainly in need of new planes: the last major purchase had been made under Rajiv Gandhi in 1986—the notorious $952 million “Airbus 320 deal”, which blew up into a scandal in 1990 after it was alleged that the PM and aviation ministry had pressured the Indian Airlines board to cancel an agreement to purchase 12 jetliners from Boeing, for which an advance had already been paid, in favour of Airbus. The Central Bureau of Investigation (CBI) pursued the case for more than a decade, alleging that kickbacks, commissions or bribes had tilted the deal, but no convictions have been secured. The fear of a similar scandal had given successive governments cold feet when it came to upgrading the fleet, as Patel was well aware: A Mumbai-based senior Air India official told me that during Patel’s time on the Parliamentary Consultative Committee, he had jokingly told the previous two aviation ministers to stop being so scared of the CBI and place aircraft orders. When it was his turn to pull the trigger, he leapt at the chance.
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Readers' Comments |
Total Comments
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hitesh
15 May 2012
12:38 PM
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Very well researched and articulated. After publication of this , Praful et al should have been behind the bars.
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Raveesh
15 March 2012
01:58 AM
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brilliant work Praveen
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kumar
15 February 2012
12:35 AM
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Fantastic article full of facts, previous CMD , SUNIL ARRORA, was a dynamic person who had managed the airline very well, brought it into profits,well praful patel along with his cabinet colleagues,p.chidamabaram and IAS officer's thulasidas & arvind jadhav should certainly be sent to jail for manipulating the aircraft deal and crippling the airline to the present state.patel cannot disown the responsibility , he has to go to jail along with the other civil aviation bureacrats{ ajay prassad, etc,.}
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anshul
4 February 2012
12:09 AM
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http://www.theglobeandmail.com/news/politics/canadian-accused-of-bribing-cabinet-minister-in-india/article2323342/page1/
now this thinG shows another little known scam of patel and company and also the man who slept while bombay was burninG
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SS
17 December 2011
08:31 PM
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NICE ARTICLE BUT I AM SURPRISED WHY GOVT NOT PUNISH THOSE WHO ARE RESSPONSIBLE OF KILLING AI
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pankaj
17 December 2011
05:07 PM
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Great Story Mr. Praveen, Cant stop appreciating you for the efforts put behind the story. We have the facts now !! Sympathetic to IA Employees !!
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Ajay Bhardwaj
17 December 2011
05:04 PM
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good article describing the truth behind air india curtain
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Marlabrute
10 December 2011
11:53 PM
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My congratulations to Mr D. too !
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Karthik
10 December 2011
04:23 PM
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This would summarize the whole story
http://ibnlive.in.com/videos/166458/30-minutes-who-killed-the-maharaja.html
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Rejimon
7 December 2011
04:13 PM
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May be worse than 2G scam.Every indian citizen's should know,how Air India was destroyed. Even more worst is the condition of AAI.Its during same tenure,India's largest Airports were sold out.
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Aastha
6 December 2011
04:04 PM
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Praveen, Marry me Praveen. I am an airhostess marry me please!
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tesh
6 December 2011
08:27 AM
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i've been waiting for someone to catch onto the emirates deals. i knew there was a backstory of kickbacks waiting there, but what gets this guy and his cronies to jail? AND what undoes all the lopsided bilaterals?
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edmund
6 December 2011
12:13 AM
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make praful patel compensate all Indian Airlines employees from 2003 he is a big crook
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vijayeta
5 December 2011
11:47 PM
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great work , but this means nothing to anybody but to air india employees families, only we know what we are going through. and great con job by praful patel , have you or your children earned a single rupee honestly with your sweat
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Sam
5 December 2011
09:37 PM
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This is too long an article ! Could the Author have summarized it a little bit better ?
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