Extension of fees may solve crisis of Indian aviation industry

Are you finding the soaring pries of aviation industry unnecessary and unwarranted? You
may be representing the general mood of people but that it is no way going to affect the
thought process of the key airlines in the realm of India.

This became clear in the recent days from the statements of Jet Airways, the country's
largest private airline. It stated unequivocally that even the recent five to six hikes in prices
is futile to solve the relevant problems of the fliers. To its consideration another 15%
increase in fares along with a host of cost-cutting measures by both airlines and the
government is necessary to put an end to the ongoing crises of the industry. For this reason
the prices are likely to be increased in the coming seasons in accordance with the reduction
of other measures.

Speaking on this CEO of Jet Airways Wolfgang Prock-Schauer stated categorically, "Even
after the latest 10% hike, we are far from being out of the woods. Another 15% hike is
needed along with structural reforms. The latter include cost-cutting by rationalizing flights;
tax reforms on jet fuel pricing; temporary relief in landing, parking and navigation charges
and a freeze on any increase in airport charges, especially at new private airports."

It has been found that the airlines are demanding deferral of user development fee (UDF) at
Bangalore and Hyderabad airports, though it has already been refuted by the Union Civil
Aviation Minister Praful Patel. To him the UDF happens to be a key part of the revenue
model of airport developers and that cannot be compromised. What is more it can be
introduced from this very month adding woes of the passengers.

To tackle the present crisis the Jet Air is set to introduce its $50-million cost reduction plan
for 2008-09. This will include stern reduction of distribution costs and also renegotiation of
the agreements with vendors. This example is likely to be followed by other key carriers
also. If all these take place once, the middle class Indians will have to rethink of the
pleasure of using airplanes frequently.

Elations and crisis management planning important to your business? The answer is simple
and direct. Public relations and crisis management planning are not only important to your
business, they are both CRUCIAL to your business, regardless of your type of business. In
today’s fast-paced and ever-changing world, business is news. Plant closings, mergers and
acquisitions, unemployment, strikes, labor negotiations, company expansions, building
projects, construction-related accidents and catastrophes are often the lead story on the
front page or the six o’clock news. Yet many organizations are totally unprepared or at least
ill-prepared to handle the public relations and crisis management aspects of these events.
This unpreparedness can lead to many negative and undesirable results for you, your
employees, your clients and customers, your company and your business and industry
sector.

Many businesses always have been and always will be in a highly visible position to the
general public and the media. For example, the building and construction industry is
important to the economy, as well as the overall health, safety & welfare of the public. The
media are very interested in the building and construction industry because of the potential
“high interest” stories it can generate, both positive and negative. To succeed in today’s
business world, all businesses must learn to manage rapid change and crises and work
 diligently to develop strong public relations and crisis management plans.

A general public relations program is important to your business to: complement

advertising; provide research capabilities for marketing efforts; provide capabilities for
special events to increase company & industry visibility; monitor governmental
organizations; to communicate the state-of-the-industry to the public, including views on
legislation, regulations, economic conditions, and other factors and events impacting your
business; and to communicate with past and existing clients. A crisis management plan,
including public relations aspects, is absolutely essential to maintain a company’s credibility
and positive image in the face of adversity. The company’s customers, employees,
management, financial supporters, industry associates, the general public and the media
need to feel that you are well organized and have the ability to handle a crisis in a very
professional manner. Crises do not afford the luxury of time to pause and think thoroughly
through the specific problem. Therefore, there is a need to be prepared for every type of
emergency most likely to happen.I believe that many crises in business, just as in our daily
lives, are often foreseeable. These crises can be managed and can provide unprecedented
opportunities for positive public relations. A majority of businesses are reluctant to prepare
for adversity because they do not want to admit that their business organization could ever
be guilty of poor performance or mistakes.

A company which does not prepare for the possibility that some plan may not work or that
conditions of business may change quickly - including changes beyond their control - will
soon find itself unable to deal with a crisis and therefore will suffer severe negative effects
on the business and its image to the public and its clients.

The most critical time for your business, when it comes to public relations, is when a
catastrophe, scandal, or some other negative event occurs which involves your business or
industry sector at large. Things can and do go wrong in the best managed companies and
organizations. Therefore, by accepting this fact and anticipating certain crises, the potential
damage from the crises may be minimized. Contingency planning for crises is not only a
good management practice in any organization but, in my view, it is a mandatory practice
for any business.

Many businesses today have high risk, high visibility, high impact on the public and our
everyday lives, and high exposure to potential crises. Because of these characteristics, the
potential damage from a crisis can be greatly multiplied. An unprepared, misinformed, or ill-
at-ease company spokesperson; a disgruntled employee; and a victim of a tragedy at a
building site have the potential of doing inestimable damage to your business or industry by
their remarks to the media. Yet there are countless times when a company representative is
thrust into the spotlight as an official “spokesperson” with little or no training in dealing with
the media, especially in a crisis situation. In fact, when it comes to dealing with the media,
most people would rather “be excused” from the task, because they are ill-prepared
psychologically and professionally to deal with the media. In today’s world, you must
become prepared psychologically and professionally.

Conducting public relations activities without a plan would be the same as someone trying
to build a quality building project without plans and specifications or a business trying to
manage the growth of their business without any plans. Conducting crisis communications
 and public relations during emergencies without a plan and training could be about the
same as committing suicide or at least “shooting yourself in the foot,” because of the
potential damage that could result to your company’s image, business, employees,
management, etc. and to the image and impact on your industry.
If you don’t believe the potential damage that can result from what I have written above,
think about the effect of poor public relations efforts during the TMI accident, NASA’s
Challenger tragedy, the EXXON Valdez oil spill event, or during the last major building site
accident and the impact of the negative image on the companies and their industries. Or
think about the effect of good public relations efforts during the Tylenol incident; during the
odometer rollback incident at Chrysler; or during the last successful rescue at a construction
site accident and the impact of the positive image on these companies and their industries.

It is time to truly recognize the importance of public relations and crisis management and
their potential impact on your business. It is also time to do something about it! There is no
better place to start than within your own organization and industry and professional
associations by developing public relations plans, that include crisis management plans, and
by training key employees on how to deal with the media. With the risks as high as they are
in your business, don’t leave public relations and crisis management to chance or to a “seat
of the pants” approach. Make a commitment and start planning for your future public
relations and crisis management efforts today. The futures of your company and to your
industry are at risk. With a strong commitment to good public relations and crisis
management planning, the results can be tremendous. Without a strong commitment, the
results can be disastrous.

Why India's aviation sector is in crisis

The aviation industry in India, through Air India, is a

gleaming example of what the lack of corporate governance
can do to a business, says Pratip Kar.

It is unfortunate that PSUs need to be privatized for them to

be able to run as commercial enterprises and make the best
possible use of their assets.

The whole of that wealth is held in trust for the people and used exclusively for their benefit. The
cycle is thus complete; what came from the people has gone back to the people many times over.

In the Wealth of Nations, Adam Smith said being the managers of other peoples money than of
their own, it cannot well be expected that they should watch over it with the same anxious
vigilance with which partners in a private copartners frequently watch over their own.
While, the simple words of J R D Tata, are central to the principles and practices of corporate
governance, its very quintessence, Adam Smith, however, tells us why practising corporate
governance may not be easy. We have been seeing a lot of examples of this in recent times.

A state-owned enterprise, by its very nature, should have no difficulty in practising corporate
governance that is creating wealth, holding it in trust for the people, and using it exclusively for
their benefit, because such an enterprise is not a private copartnery and thus does not suffer from
the kind of conflict which Adam Smith talks about.

But the public perception and the reality of the level of corporate governance in the Public Sector
Enterprises in India is not particularly encouraging, except in some of the Central Public Sector
Enterprises (CPSEs) included in the Navratna category.

Now that the CPSE disinvestment is back on the burner and the first disinvestment after nearly
five years is round the corner, it is important that a serious thought is given to the improvement
of governance standards of the CPSEs.

Disinvesting a miniscule portion of shares in a CPSE, held in the name of the President of India,
is only a part of the story. It will serve the governments immediate objective of getting the much
needed funds to its coffers.

It will provide new investment opportunities to the investors and help increase the depth and
liquidity of the stock market. But there is a greater opportunity of wealth creation for the people
of India, which will be lost, if scant attention is paid to the practice of corporate governance
standards at the CPSEs.

The aviation industry in India, through Air India (as well as the private airlines), is a gleaming
example of what the lack of corporate governance can do to a business it can result in a faulty
business strategy.

Corporate governance is not about doing well in good times, but about long-term sustainability
of business through good times and bad. This truth does not dawn upon us most of the time and
we blame the stars and God (in that order) for our business failures.

Corporate governance usually becomes a challenge for the CPSEs because the separation of the
multiple roles of the state becomes quite difficult and the boundaries tend to blur posing greater
challenges to the efficient management and accountability of such enterprises.

Pricing of products of CPSEs is one such example. Besides, as it is, the balance between
economic and social goals is not always easy to achieve; continuous ministerial interference
makes it much more difficult.

Consequently, the distinction between what constitutes a policy issue making ministerial
engagement legitimate and those which are predominantly of commercial nature, remains opaque
in many CPSEs. Decision-making thereby becomes all the more complicated. The Board of the
CPSE loses the independence in decision-making.

Some of the CPSEs, of course, have a commendable track record in corporate governance, such
as NTPC, ONGC [ Get Quote ] and BHEL to name a few.

These companies have been wealth-creators, though mainly on account of the near-dominance in
their operating sectors, and partly aided by a strong governance framework. But this number is
only a handful.

There are certain governance issues which continue to plague the CPSEs even the more
enlightened ones though to a lesser extent. In practice, the CPSEs continue to be ministry-
managed, instead of being board-managed.

The boards have little or no role in strategy formulation and setting the direction of the company.
The MoU between the CPSE and the ministry by itself a brilliant mechanism for target-setting,
monitoring and 360 appraisal often becomes a routine annual exercise and the board has little
role to play.

The board has no role in the selection of the independent directors. Even though there is a fair
process of selection of board members set out by the Department of Public Enterprises, the
administrative ministry has the last say in recommending the final list to the government.

There is no separation of the posts of chairman and managing director and the listed CPSEs have
dragged their feet in complying with requirement of Clause 49. Often the posts of independent
directors are ornamental and meant to provide employment to the superannuated; the attendance
record of the independent directors is poor and the board composition is often unwieldy with as
many as 18 directors in many CPSEs.

Contrary to public perception of lack of accountability for the CPSEs, the CPSEs are weighed
down by multiple levels of accountability in which as many as fifteen institutions have an
important role.

There has been no attempt to rationalise this structure, without sacrificing the effectiveness of
supervision. This leads to far more intrusive supervision than is desirable.

In turn, it makes the management over cautious and leaves the board to take decisions which, in
the normal course, should be taken by the management. The number of board meetings is far in
excess of what the most admired global companies require and the agenda items far more than a
board director can be reasonably expected to read through.

This has two implications. One, it saps the freedom and entrepreneurial spirit of the managers
and results in hamstrung leadership in the CPSEs. Two, it leaves little time for the board to
devote to strategy and provide direction to the company, which is its primary role in a board-
managed company. That may be the covert objective a cynic may however be tempted to say.
All this can change and needs to change, if we want to make our public sector companies to be
the best in class. After all, was it not the governments Circular [No DPE/11(2)/97 Fin, issued on
July 22, 1997] granting autonomy to selected Central Public Sector Undertakings (CPSEs) and
classifying them as Navratnas, which had turning our public sector enterprises into global giants
as its express objective?

Since good governance results in long-term efficient use of assets, improved factor productivity,
better performance of enterprises and greater wealth creation, improving the governance
standards of the CPSEs should logically be an end to be pursued in national interest with or
without privatisation. What is required is only a change in the dominant logic, a mindset change.

Top 7 Ways to Survive A Public Relations

Crisis
Everyone wants to believe their company will never suffer the kind of public humiliation Ford
and Firestone are battling now. Ignoring potential public image problems will not help you when
your reputation is on the line. We all make mistakes. How you handle your mistakes says more
about you and your company than how you handle your successes.

1. Develop a contingency communication strategy BEFORE you need it.

Define your company’s potential "clay feet" and decide how you would handle a misstep.
(Better yet, address the vulnerable issues before they become public knowledge.)

2. Identify a single point of contact at the beginning of a crisis.

Tap one senior source in your organization to which to refer all media and investors. This
person must be available, informed, and credible. Most of all, he or she must be brilliant
under pressure and present a composed image at all times. Your PR firm can help you
prepare this person to be cool under a media onslaught.

3. Communicate internally.

The worst thing management can do in a crisis is hide from its employees. Keeping
everyone informed of the steps being taken to solve the problem will minimize water-
cooler gossip and maintain morale.

4. Play an active role in the story.

Don't let the media freight train run you over. Communicate early, and often, with your
investors and the public. Let everyone know you are on top of the problem, and
committed to curing it as soon as possible. You don't have to detail your efforts or your
findings every step of the way, but do keep an open line of communication so your voice
may be heard amid the din.
 5. NEVER LIE.

It will always come back to haunt you. Your dishonesty will be remembered long after
the crisis has passed. You are in the spotlight -- stand up and take the heat.

6. Talk about the future.

Now is not the time to introduce a new product or service. You are not trying to deflect
attention. You can, however, talk about the new procedures you are putting in place to
prevent, or better prepare for, a similar problem. A crisis need not be the death knell of
your business. Always project beyond the immediate.

7. Practice the phrase: "The important thing to remember is..."

Fill in the blank with something positive about your organization. Use this line whenever you are
asked about the crisis, before addressing the question at hand. "The important thing to remember
is XYZ, Inc. has consistently demonstrated our committment to safety through all our years in
business."

Challenges For Aviation Industry

The growth in the aviation sector and capacity expansion by carriers
have posed challenges to aviation industry on several fronts. These
include shortage of workers & professionals, safety concerns,
declining returns and the lack of accompanying capacity and
infrastructure. Moreover, stiff competition and rising fuel costs are
also negatively impacting the industry.

1. Employee shortage: There is clearly a shortage of trained and

skilled manpower in the aviation sector as a consequence of which
there is cut – throat competition for employees which, in turn, is
driving wages to unsustainable levels. Moreover, the industry is
unable to retain talented employees.

2. Regional connectivity: One of the biggest challenges facing the aviation sector in India is to be
able to provide regional connectivity. What is hampering the growth of regional connectivity is
the lack of airports.
3.Rising fuel prices: As fuel prices have climbed, the inverse relationship between fuel prices
and airline stock prices has been demonstrated. Moreover, the rising fuel prices have led to
increase in the air fares.

4.Declining yields: LCCs and other entrants together now command a market share of around
46%. Legacy carriers are being forced to match LCC fares, during a time of escalating costs.
Increasing growth prospects have attracted & are likely to attract more players, which will lead
to more competition. All this has resulted in lower returns for all operators.

5. Gaps in infrastructure: Airport and air traffic control (ATC) infrastructure is inadequate to
support growth. While a start has been made to upgrade the infrastructure, the results will be
visible only after 2 - 3 years.

6. Trunk routes: It is also a matter of concern that the trunk routes, at present, are not fully
exploited. One of the reasons for inability to realize the full potential of the trunk routes is the
lack of genuine competition. The entry of new players would ensure that air fares are brought to
realistic levels, as it will lead to better cost and revenue management, increased productivity and
better services. This in turn would stimulate demand and lead to growth.

7. High input costs: Apart from the above-mentioned factors, the input costs are also high. Some
of the reasons for high input costs are:-
Withholding tax on interest repayments on foreign currency loans for aircraft acquisition.
Increasing manpower costs due to shortage of technical personnel.