May 29 (Bloomberg) -- Air India Ltd. is set to receive its first Boeing Co. 787 this week as a pilots’ dispute over who should fly the aircraft triggers cuts in international services and more than 100 dismissals.
A team is already in the U.S. for the handover, which will follow the government giving final approval for a method of pursuing compensation for delivery delays, Civil Aviation Minister Ajit Singh said in New Delhi today. Air India plans to start using the jet with services to Melbourne, he said May 25.
“The induction of the 787 should have been a major and positive milestone,” said Binit Somaia, a Sydney-based director of CAPA Centre for Aviation, an industry consultant. “Instead, there is a possibility that the new plane may be temporarily grounded due to human-resources issues.”
Travelers have suffered three weeks of disruptions because of protests rooted in a merger five years ago that left the state-owned airline with duplicate resources and warring unions. It has also caused losses, with the government this year agreeing to 300 billion rupees ($5.4 billion) of bailouts through 2020.
The fuel-efficient plane is about three years late because of production delays, which have prompted Air India to seek about $1 billion in compensation from Chicago-based Boeing. Singh today said a panel of ministers will discuss various options if the planemaker doesn’t agree to the claim.
Dinesh Keskar, senior vice president of sales for Boeing Commercial Airplanes in India and Asia Pacific, didn’t reply to two calls to his mobile phone and an e-mail seeking comments. The first 787 for Air India will be delivered from Everett, Washington, Wilson Chow, a company spokesman, said in an e-mail last week without elaboration. G. Prasada Rao, an Air India spokesman, also didn’t respond to two calls to his mobile phone.
The introduction of the 787 has sparked protests as Air India has given training on the new aircraft to pilots who previously worked at Indian Airlines, the state-owned domestic operator that combined with Air India in 2007.
Pilots who worked at Air India before the merger say they should be the only ones to fly the aircraft as the planes were ordered before the combination. All the 43 Airbus SAS planes bought by Indian Airlines are operated by pilots from that company even after the merger, according to the Indian Pilots’ Guild, which represents about a third of Air India’s 1,500 current pilots.
An Air India pilot will have to work at least 14 years before earning promotion as a commander if pilots from Indian Airlines are also allowed to fly the new jets, said Amit Jain, a member of the Guild.
Calling in Sick
Members of the union have called in sick since May 7, forcing the carrier to cut flights to Hong Kong, Osaka and Toronto. Domestic services have largely been unaffected. Minister Singh canceled plans to attend the 787 handover because of the pilots dispute.
The carrier sent 30 pilots each from Air India and the old Indian Airlines to Singapore for training on the 787, according to Singh. The company will have 8 pilots for each Dreamliner, the first wide-body aircraft to join Air India’s fleet in more than two years. The plane will have 256 seats in a two-class configuration, according to a Boeing statement.
The Dreamliners were part of a wider fleet expansion plan that was meant to turn Air India into a major international carrier. The government combined the company with Indian Airlines to bolster its network and help it expand overseas.
Instead, the merger has left Air India mired in 438 billion rupees of debt, struggling to integrate different businesses and weighed down by labor disputes. Last year, the carrier canceled more than 1,000 flights as former Indian Airlines’ pilots stayed away from work for 10 days to complain about being paid less than their colleagues from old Air India.
‘Driven From Top’
India’s national auditor said in a report on the Ministry of Civil Aviation in 2011 that the merger was “ill-timed” and was decided without considering the difficulties involved in areas such as staff integration. The decision was “driven from the top,” said the Comptroller and Auditor General of India.
“The integration has been badly managed,” said CAPA’s Somaia. “The resolution of such human-resources issues is central to Air India’s turnaround.”
The carrier, once India’s biggest, has slipped to fourth-place behind newer private carriers, Jet Airways (India) Ltd., IndiGo and SpiceJet Ltd., which have lower costs and fewer staff. The airline had 17.6 percent of the market in April, according to data published by the Directorate General of Civil Aviation.
The carrier may also post a loss of 70 billion rupees in the year ending March, the worst performance nationwide, CAPA said in a report last week. Air India probably lost 78.5 billion rupees last fiscal year, Minister Singh said in a written reply in parliament on April 25.
The government has injected 72 billion rupees into Air India since April 1, 2009. That support has weighed on other Indian carriers including Jet and billionaire Vijay Mallya’s Kingfisher Airlines Ltd., which have made losses while competing with the state-subsidized company.
The 787s may help Air India to start turning around its reputation, domestically and overseas, as the company is only the third carrier to receive one. All Nippon Airways Co. got the first in September followed by Japan Airlines Co. in March.
The Dreamliner marks a breakthrough as it’s the first aircraft to be built with a large plastic fuselage. That helps cut fuel usage as much as 20 percent and has allowed carriers to open new routes that were previously weren’t profitable with larger planes.
“The 787 will make a qualitative difference to Air India’s image and position,” said Harsh Vardhan, chairman of Starair Consulting, a New Delhi-based company that advises carriers. “But any strike creates a terrible damage to the brand value of an organization.”
To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at firstname.lastname@example.org
To contact the editor responsible for this story: Neil Denslow at email@example.com