MAHARAJA in Distress !!

12 hours that’s what it took. The fears that the Air India’s losses might spiral up to heights of 5000 crores have come true, the losses now stand at 7200 crores. But in no sooner time the media is out with its own “read to analyze articles”. The papers are full of why how Air India has been spiraling down from the past 2 years. Welcome change though the whole issue of Gayism and its pin up girl Celina Jaitley (who got some welcome headlines) was getting quite irritating.

Staying in aviation business is no child play JRD Tata was smart enough to understand that. Pioneering an industry has never been the forte of any government across nations and similar was the case for the airline industry. Many countries have national airlines that the government owns and operates. Fully private airlines are subject to a great deal of government regulation for economic, political, and safety concerns. Private players now rule this sector. But then the global recession and terrorism to a large extent have caused some worry to all carriers across the world. If we do go back to history air travel has survived largely through state support, this came through in way of equity or subsidies. Risky and costly is the best way to describe this industry but one has to outweigh the microeconomic losses by sighting higher growth due to global mobility. Over the years many countries have privatized their national airlines in order to improve profitability in the future and this has paid rich dividends. Innovations such as the low cost carriers have made their mark. Thus today many large airlines today are privately owned and are therefore governed by microeconomic principles in order to maximize shareholder profit.

But then as mentioned earlier this is a industry which has high operational costs. Aircraft financing by itself can be quite complex. Since this is an industry which gives high importance on safety newer planes with better safety features are being designed throughout and carriers must upgrade their fleet which is why they need to take major long-term fleet decisions with the goal of meeting the demands of their markets while producing a fleet that is relatively economical to operate and maintain. But then being capital intensive is not the only problem alone. Hedging oil and fuel prices also play a major role in the operational costs of an airline. Another important factor amidst all of this in view of the congestion apparent at many international airports, the ownership of slots at certain airports (the right to take-off or land an aircraft at a particular time of day or night) has become a significant tradable asset for many airlines. Clearly take-off slots at popular times of the day can be critical in attracting the more profitable business traveler to a given airline's flight and in establishing a competitive advantage against a competing airline.

One can wonder the reason for the discussion of the high level of economic forces but then most of the reasons cited out by the EXPERTS pertain to the above. The problems plaguing the national carrier are numerous but then ceding market share and bad routes top the reasons along with the merger which has lead it to so called spiral down. Bad routes cant be complained about especially when the airlines operates out of some of the most inhospitable places ie within India. Most private players have virtually no planes going to the north eastern parts of the country. Many small towns and cities are still yet to be served by private aircrafts. The fact that Air India operates out of such places goes down completely UN noticed when it comes to “Bad Route Planning”. Not to mention the cost of operating a Airport and the maintaining the ground crew at these places. But then the so called EXPERTS fly in or out only from the major towns. The market share has clearly dipped and the major cause has been the private players taking fair travel to newer heights. Most of Air India aircrafts were delivered back in the late 1980’s its surely could not compete the newer “Dream liners”. We did go ahead and order better planes but then in days of a recession delivery issues plagues everyone and thus the carrier had to Dry Lease planes. The merger surely did not go as planned but then merging 2 giants was not going to go happen without any glitches. The media ever so vocal about “Privatization” has been going on rattling about it. British Airways was privatized one would want to check out its state after the government gave up its control. The Rod Eddinton era resulted in a 50% slump in profits. Similar scenes were repeated post September 11^th when most of the private carriers faced problems of liquidity, high fuel prices and drastic reduction in travel. The players responded by drastically cutting workforce and selling of stakes to investment bankers (German subsidiary Deutsche BA was sold to investment group Intro Verwaltungsgesellschaft). Fresh equity was also raised to pay off debt.

Try doing rather mentioning of doing the above in India. What would result is a huge dharna outside parliament. How can even someone dream of throwing out people out of government organization. Try selling of stake the Left would probably leave no means unturned to see the government fall’s down. Raising an IPO in times of a volatile stock market is also not advisable. Someone needs to feel sorry for Praful Patel. Some complained that years of bad running have undone the carrier. But since the government took Air India over the whole accumulated losses were around 1000 crores. That figure in over 5 decades of existence is not bad. The carrier was hit hard by the recession and the fuel prices and probably the decision to buy planes did not come at the proper time. We talk aircrafts from Air India not flying and thus losing money. More than half of Singapore Airlines fleet was “Grounded” due to planes going half full. In days where airlines cant pay of fuel charges people are drying out loud that our planes did not fy hence did not make money.

As a national airline it was one of the best in Asia and the world. But then the recession took a toll on it as it did with many airlines globally. Alitalia have gone bankrupt and are shutting down operation. British Airways have reduced staff without giving salaries. But then being a PSU Air India cant resort to the above tactics. But then a restructure is required. The carrier is overstaffed and the professional standards for which it was known for have vanished. The future does look grave. But then necessary steps have to be taken. NPA’s need to be eased out and that would include staff also.

The MAHARAJA has been cordial enough time now it showed some resilient spirit.

The Dilemma named MMRCA

The IAF had projected a requirement for 126 aircraft's back in 2001when its strength was down to 39 squadrons. The initial requirements were for a 20 ton aircraft which was supposed to be filled with the Mirage 2000 whose capabilities had impressed the IAF during the Kargil War. However this fell through as the upcoming manufacture of the Dassault Rafale and lack of orders, the Mirage production lines were to be closed down.

Meanwhile delays with the LCA project and the unavailability of the jointly developed 5^Th generation aircraft not happening before 2020 made the IAF float a RFI in 2004.

Since then 5 years have passed and finally we are on the verge to finalize on the selected few. Below is an analysis on who might actually win.

The SUPER VIPER -

India as a matter of fact has never procured any defense equipment which has been fielded by Pakistan. Even during the 65 and 71 wars while Pakistan has the much famed Sabres and Star fighters and the Patton tanks India relied on tried and tested old Russian inventory. The thought has not been so for the past few years. In a bid to see that the current strength of the IAF does not fall beyond the 40 squadron mark in a time most of our neighbors have shown signs of hostility the government floated a requisition to draft in MRCA’s (Multi Role Combat Air crafts). Since then the Super Viper has been a common sight in the Bangalore Aero Show. Let’s face it 13 million flight hours, 4 lakhs combat hours over lakh combat missions if figures were a fact to choose a place the Viper would have ousted the best in the business. Add to that the fact that more than 20 nations has been using it since its inception in the 70’s. Even the IAF is well aware that the F 16 IN is probably the only aircraft which fits in perfectly in the qualitative requirement. As a icing on the cake the F 16 IN would come with an AESA radar which the IAF just adores. What also lies ahead if the IAF does go ahead with the F 16 is the option of getting the F 35’s at a later date. The us with the F 16 seems to have hit the IAF with an offer which is quite irresistible to resist. But then there are a few glitches. The F 16 is on the verge of being phased out and the USAF is not ordering any more of it. The F 35 shall now be the next move on for the USAF. Thus procuring a plane whose production line would be stopped hence would not go well for the IAF. And again there is the fact of India never procuring anything that has been fielded by Pakistan. The US knows the fact and has tried making the deal a tag “Sweeter” by saying India would have access to the F 35’s at a later date.

The GRIPEN -

Its been labeled as “The Independent Choice”. The tag has been well chosen. The MMRCA deal is pointed at changing a lot of things, the Gripen is the only underdog in the competition and choosing it would certainly be a choice aimed at being “Independent” and looking for “Change”. What many of us are unaware is of the fact that Gripen though being an underdog is an excellent aircraft and like the F 16 fits in quite well with the qualitative requirement the IAF had asked for. What also are crucial to Gripens state in the deal is its low turnaround and maintenance costs. The aircraft also adds a lot punch with its new systems and sensors. What also speaks volumes for the aircraft is the time it can be turned around on the ground a fact in which it beats all its competitors. But then would any government again take the risk of buying defence equipment from Sweden again. We are still shaken from the aftershocks of the Bofors deal. The 155 mm shell has scored a hit where we would least want it to.

The Future FULCRUM

No defense procurement in India looks complete without any tender from Russia. While previously we have quite successfully inducted the MIG 29’s and the Sukhoi’s looking to Russia this time around was not expected. But then Russia has always had that leverage with India and it wasn’t that hard to pitch in the MIG 35. The major fact that India may go with the Fulcrum is the commonality of operating it. The gurus already say that buying the MIG 35 would mean huge saving’s in infrastructural and training costs. The MIG 29 always had had good reviews from the IAF. While a few days back most of the Russian MIGS were grounded due to corrosion the IAF MIGS had no problems as such.

But still apart from what the Russians claim about the FULCRUM being a far superior than its 29 variants the IAF doest not seem convinced enough. Though Russia has been our most prominent defense equipment suppliers the relations have taken a beating over the years. Russians are not the best when it comes to after sales services, provision of spares to have been very hard to get. Also in a way what could go horribly wrong for the MIG 35 is the fact that the Russians themselves have not chosen the MIG and are filling up the spaces with the Shukois. Add to that the fact of the Russians overpricing deals midway much like the Groshkov deal could result in the IAF actually rejecting the FULCRUM.

The French Connection – RAFALE -

I cited at the beginning of my article the intention of the IAF to go for the MMRCA deal. Initially though the real intent was to procure just the Mirage 2000 an aircraft which the IAF hold in very great esteem. But as always Red Tap ism affects all decisions in India time ran out and Dassault closed all production lines for the Mirage and offered the Rafale instead. The Rafale along with the Gripen are the only 2 aircraft's in the competition with a refreshing newness to them. Neither of them comes with an old aircraft platform upgraded to meet the requirements of today’s modern warfare. The F 16 / 18 as well as the MIG 35 (evolving from the 29) are based on old platforms. The French has also cleverly pitched the Rafale as being the next logical step after the Mirage. The aircraft has proven battle worthy in the recent operations in Afghanistan and Iraq. The Rafale will also come with new, high-capability variants of MBDA missiles that the IAF has operated for decades, and places a lot of value on. There is a problem about the cost of the aircraft but with an added cost comes the reliability that the French have been extremely professional in all their defense deals till date with India. But the fact which could make the IAF think for the Rafale is its ability to deliver nuclear weapons. Add the the fact that it is a proven aircraft carrier based aircraft too operating from the Charles De Gaulle. But then price is always an issue when it comes to India and the Rafale is the most costliest among all present in the competition. Also like the Gripen and the Bofors the Rafale too might have a nemesis called the Scorpene.

The Super HORNET -

The Super Hornet is quite visibly Super considering its sheer size and payload capability. In what became a common picture of USA becoming a super power was Hornets taking off from the flight decks of its aircraft carriers to precision bomb targets mostly in the Gulf and of late in Afghanistan. It is considered to match the capabilities of the Super Viper if not be better than it and like the Rafale is a proven aircraft operating both from carriers as well as ground. What the Super Hornet also does is effectively reduce the pilot workload, its digital flight control systems are said to be better than any aircraft (within the same range) operating today. Being proven on aircraft carriers means that the aircraft can take off and land within a shortened runway, with full payload. The IAF too has been dealing with the Boeing Corp for quite some time now and are quite satisfied with the dealings. Then like the F 16 deal there is a benefit of getting the F 35’s at a later date. But then again the USAF has no more orders for the Hornets and is moving on the F 22 and F 35. The F 18 also is in much ways similar to the Sukhoi which the IAF already field. We would not want 2 aircraft's of the same capabilities running together the logistics effort would drive the IAF crazy. Also whatever Boeing might say the Hornet is effectively a carrier based aircraft it was developed with the mindset of having a multi role aircraft to be fielded from the sea. Whether it would be as effective on the ground is a big question.

So finally who would it be. Its boils down to the Hardened and Proven vs the Underdogs. I doubt the IAF would go with aircraft's whose production lines have almost been stopped which would rule out both the Super Viper and the Super Hornet. Though both are well proven the choice this time is to be “Independent”. The Fulcrum could win the deal but Russia comes with a long tail of delays, poor after sales service. Also the FULCRUM has not been chosen by the Russians themselves. This would leave the Gripen and the Rafale possibly the 2 underdogs in the competition. The IAF have had a long association with the French and over the years deals with them to acquire the Mirage 2000 and the Mysteres have gone on smoothly and professionally. But then as a nation we like the best bargain and the Gripen comes off as the best.

The Gripen seems to be the perfect complement to the inventory of aircraft we already have. As cited before operating the Hornet or the Rafale would mean the IAF have similar aircrafts operating thus creating a logistical challenge not to mention the fact the gap of having a MRCA would still remain. Also given the fact that the Gripen is the best price wise too would make it a certain forerunner to bag the deal. If it would it could edge out to the Rafale in point of the nuclear weapons capability. But the point is would the defense ministry have the “BALLS” to go for something Swedish. With France a nemesis named Scoepene exists too.

But then as stated earlier this time the deal is aimed at CHANGE and the decision for such should be a choice INDEPENDENT of political or any other kind of pressure.