Mallya Vs Air India : “What is the difference between Vijay Mallya who lost Rs 10,000 crore and Air India which lost Rs 30,000 crore? Bank money is lost (in case of KFA) and public taxpayer’s money is lost (in AI’s case),” asks Mohandas Pai, former Chief Financial Officer and HR Head of Infosys.
The only difference – Air India has a forgiving promoter – government of India who stood by the company despite the atrocious decisions taken by its management and those responsible for its growth and wellbeing. But for the government, who kept on pumping in good money after bad, Air India would have crash landed ahead of Kingfisher.
In fact, to a large extent the price war started by Air India, which was losing market share to private players is one of the biggest reasons for the woes of the industry. A full service airline with a high cost structure like Kingfisher was one of the first to feel the pressure.
Former Air India executive director Jitender Bhargava in his tell-all book ‘The Descent of Air India’ has revealed how the airline went was brought to its knees. These include several bilateral agreements that went wrong; the shutdown of profitable routes of the airline and giving them away to other airlines and aircraft bought at high prices and sold off at junk prices.
Mallya at least cannot be fouled for deliberately bringing down its airline, which at its peak had the lion’s share of passenger traffic and was known for its quality. But there are reports that Mallya too has siphoned off money from the company. However, at the same time he did bring in money by leveraging his other assets.
The main reason why Mallya has people speaking against him is because he flaunted his wealth at a time when his employees were on the street asking for their salaries. He played the snob while dealing with banks, despite giving personal guarantees on the loans. Other airlines too were facing problems, especially Jet Airways who delayed salary payments for a brief while. Jet Airways would have gone the Kingfisher way had it not found an investor in Etihad. Kingfisher could not find a partner to bail itself out.
However, Mohandas Pai has rightly brought the spotlight back to AI and the reasons for its downfall. Mallya’s running away has impacted Rs 9,000 crore from public sector banks, but Air India has swallowed Rs 30,000 crore of tax payers money and continues to do so with the new government showing no signs of exiting the airline.
In an interview with Mint, Bhargava clearly pointed out at Praful Patel, the then Minister for Aviation as being the person responsible for the plight of the airline, while the top management of the airline were mute spectators. He said “I don’t think anyone will dispute the fact that Praful Patel had a major say in most decisions taken during his time as civil aviation minister. (Then chairman V.) Thulasidas, for whatever reasons, was only too keen to allow decisions being taken by Delhi. Whether it was the aircraft acquisition, merger (with Indian Airlines) or many other big expenditure decisions which harmed Air India financially were taken without proper thought or detailed discussions within the airline. A handful of Air India officials did lend support for questionable reasons. What also surprised me was though we had (banker) N. Vaghul on the board as an independent director, he did not red flag any of the decisions which had a huge financial bearing and led to eventual crippling of Air India.”
Decisions taken during those years continues to affect the airline. While losses of Kingfisher have been capped, the same cannot be said about Air India which needs taxpayer’s money to remain airborne, despite its gross inefficiencies. Finance Ministers will be forced to provide money every year to avoid bad press and protect misplaced national interest.
Pai is right in calling for Mallya and destroyers of Air India to be treated similarly. Mallya has fled away by not paying the banks while Air India’s erstwhile team has gone scot-free after destroying the company and consuming more than three times the money.