Predictably, government has had to step in to prop up the carrier. Already struggling due to factors affecting all airlines, a bloated workforce and spiraling debt is making it near impossible for Air India to meet day-to-day operational costs.

Competition from leaner carriers

Following years of virtual monopoly, and restricted international competition, Air India is under pressure from leaner carriers. Share of passenger traffic has fallen from 38% in 2004 to 15%. Exacerbating the problem, the carrier has an employee-to-plane ratio of 210 employees, compared to industry average of about 150. In its current state Air India is no longer viable.

Leaner structure, lower costs

While Prime Minister Manmohan Singh is willing to approve investment of US$ 2 billion, it is contingent on a major business overhaul. Given Singh's decisive national election win, he may be tempted to privatize the carrier or even let it collapse. Although unlikely, newfound power gives him leverage over management and he must hope unions.

Praful Patel, India's aviation minister, has warned, "Air India must shape up, become leaner and trimmer, and also must put its best foot forward".

"Harsh decisions"

Chairman and Managing Director, Arvind Jadhav is trying to prepare his 31,000 staff members for new realities, "Considering the critical financial state of the airline, we should all be prepared to face the impact of harsh decisions that will be required to be taken in the coming weeks to meet the current difficult financial situation."

Management want to cut annual employee costs by more than 17%, or US$ 100 million, and have already asked senior staff to go without July salaries. The carrier is also looking at how to improve employee productivity and eliminate restrictive working practices. A committee has been set up to review existing wage agreements with unions. Despite Jadhav's hopes, the Jet Airways' experience of last year makes a union - management stand off likely.

Government is also reviewing the carrier's order for 100 new Boeing and Airbus aircraft. Changes at board level can also expected as Delhi seeks long-term change.

Remarkable failure of management

While Air India stress that the industry at large is in trouble and company spokesman, Jitendra Bhargava pleads, "Tell me, which airline is making profit, you can't view Air India in isolation, right?". Industry analysts aren't convinced by the argument.

Kapil Kaul, chief executive of Centre for Asia Pacific Aviation blames poor management and the fact that the carrier has not evolved to meet newer competition. Kaul comments, "Air India is an example of a remarkable failure, (it is) still an iconic brand, but unfortunately it has a reputation which is of an unreliable and shoddy airline."

Drastic changers are required. The airline, its staff, government and the unions must work together - and quickly - to reach a viable solution if Air India is to remain in the skies.