Air India and Indigo lock horns

 

Air India's employees union today joined issue with the ongoing advertisement war between the national carrier and budget airline IndiGo by asking the Mumbai airport authorities to remove the controversial ad. Air Corporations Employees Union, which is the largest staff union at the government-owned airline, has in a letter to the Terminal 1B Manager of the Mumbai International Airport Limited (MIAL) asked the authorities to create a healthy atmosphere at the airport and remove the controversial ad put up by the IndiGo immediately.

Union regional secretary Vivek Rao said, "As the airport operator, you cannot absolve yourself from the responsibility on such an issue as it is your bounden duty to ensure that no airline use such a defamatory and slanderous advertisement campaign against any other airline." 


"Therefore as a responsible airport operator, we want you to immediately remove the glow sign put by IndiGo against Air India," the union said in the letter, which it wrote after meeting the terminal manager. 

 

The controversy started early last week when the AI ad placed next to the check-in areas of IndiGo said: 'Wish you a comfortable flight. Next time fly with Air India and feel the difference.' 

IndiGo, which of late has been faring badly on on-time performance amid its aircraft reporting frequent technical glitches, reacted the very next day with a counter ad, that named Air India directly. 

At the check-in bay of the national carrier, IndiGo put up a small standee that read: 'Yes, Air India, there is a difference. Says the government.' 

To back its claims, the Gurgaon-based airline added a small table that shows its airline rated as the best when it comes to on-time performance and Air India as the worst. When it came to passenger complaint, IndiGo was rated as the lowest while the national carrier had the highest number of complaints, as per the IndiGo ad. 

The union letter concluded saying "We hope you take a serious note of the development and our letter and create a good and healthy atmosphere at the airport." 

When contacted, an official of MIAL said the ad is still present where it was placed.

 

Asianet Newsable tells you exactly why the stakes are so high for both these airlines -

 

Air India

"Air India was notorious for incurring losses. My government succeeded in bringing Air India back to a situation where it is logging operational profits,” prime minister Narendra Modi said in his Independence Day address from the Red Fort last year. According to a Mint report, this year Air India has halved its losses to Rs 2,636 crore in the year ended 31 March from Rs 5,859 crore in the previous year almost entirely on account of the Rs 2,704 crore saved on account of cheaper fuel. The state-run airline is currently  struggling to compete with younger, nimbler and infinitely more ferocious competitors.  Earlier, the Union civil aviation minister Ashok Gajapati Raju himself admitted that Air India's books are so bad that no one will come to invest or purchase it. "Finances of Air India are so bad that nobody might come to invest or purchase it even if it is put on sale by the government. However, at the same time, public money cannot be pumped into the airline forever." Over the last 10 years its losses average around ₹4,500 crores per year. At present, it has a debt of ₹51,367 crore  and an operating cost of ₹23,951 crore. In April 2012, after reviewing its abysmal financial condition, the government approved a turnaround plan of providing equity infusion of ₹30,231 crore up to 2021, subject to the achievement of certain milestones. The government has so far infused equity of ₹22,565 crore in the airline.

 

The government has been unable to find a reliable leader who can take Air India's problems head-on, withstand tremendous political pressure and turn the airline around. Over the last couple of years, six senior IAS officers have tried and failed.  The current incumbent, Ashwani Lohani, has read the riot act and tried to contain erring employees but he has his task cut out.   Amusingly, among his many dictates was a rule asking pilots to say 'Jai Hind' prior to take off, which he claimed helped morale. 

 

 Indigo

The country's largest airline by market-share has been having a tough time at the bourses. Earlier in August this year, according to a PTI report, shares of InterGlobe Aviation, which owns budget carrier IndiGo, had plunged over 11% amid decline in quarterly profit and concerns over operational issues with its new aircraft fleet. “Profitability was lower than last year primarily because of competitive fare pressures. We have reduced our debt by Rs 458 crore during the quarter,” IndiGo president and whole-time director Aditya Ghosh said in the report. Following this the market capitalisation of the company eroded by Rs 3,928.1 crore to Rs 31,251.35 crore.

 

In the quarter, it reported around 7.4% decline in net profit at Rs 591.77 crore for the first quarter ended June saying it was due to competitive ticket pricing. The company posted a net profit of Rs 638.89 crore in the same period last fiscal.

 

 

Gosh also acknowledged that A320 neos aircraft continue to pose “operational challenges”. “Operationally, A320 neo continues to be a challenge. We are currently looking at a scenario where we would slow down the delivery of our A320 neo aircraft to allow (engine maker) Pratt & Whitney catch up with the production of updated engine,” he had said.

 

This comes after earlier this year, in January, shares of Indigo  witnessed heavy selling, and plummeted nearly 19 % on investor concerns over the targeted fleet size by March due to delay in supply of more fuel-efficient planes by Airbus, said a PTI report.

This despite the fact that the airline reported  a 23.7%  jump in net profit at Rs. 657.28 crore for the three months to December, but said it will miss the 111-fleet target by March following labour issues at Airbus.

The delays could throw a spanner in the ambitious growth plans of IndiGo, which has been betting on the more fuel-efficient A320 Neos (new-engine option), the delivery of which was to start from this month and had even told this to investors during the recent IPO launch.