The Air India Maharajah is hurt and bleeding

It’s not government’s business to fly planes. Energy needs to be focused on health, education and generating employment

GN Bureau | June 6, 2017


#Ashok Gajapathi Raju   #Mahesh Sharma   #civil aviation policy   #national carrier   #Air India   #Lok Sabha  


Air India is gasping for breath and we need to stop pumping in taxpayers’ money to keep the national carrier afloat. Turnaround efforts have come a cropper and each time an Air India flight takes off, it burns good money that could have been put to use to tackle more pressing national issues.

The government has already made it clear that it wants to exit Air India. So much so that finance minister Arun Jaitley told the Economic Times: “Sell it completely.”
 
The message could not have been more clear. Period.
 
Jaitley said that Air India “owns a large number of very valuable properties and that can bring down the debt levels itself and then it has some very powerful connections and routes and therefore if you do a due diligence and see its potential globally, the government will also have to step in and take a part of the share but the whole debt of Rs 55,000-60,000 crore will come down substantially”.
 
The Niti Aayog has already proposed total privatisation of Air India. The Aayog has cited various international examples of governments selling their entire stakes in airlines and not retaining any shareholding to make them viable.
 
Air India was given a Rs. 30,231-crore lifeline in 2012 as part of a turnaround plan that was spread over nine years. Over half of that time has already gone. In the remaining time, some difficult and harsh decisions need to be taken so that losses can be cut and privileges are ended.
The national carrier was founded by JRD Tata as Tata Airlines in 1932. After the second world war on July 29, 1946, Air India commenced operations. It has been 70 long years since then and the news has been far from good despite India being quite a promising country for aviation.
 
The National Civil Aviation Policy, 2016 states that India has the potential to be among the global top three nations in terms of domestic and international passenger traffic. It has an ideal geographical location between the eastern and western hemisphere, a strong middle class of about 30 crore Indians and a rapidly growing economy. Despite these advantages, the Indian aviation sector has not achieved the position it should have and at present it is ranked 10th in the world in terms of number of passengers.
 
The government has proposed to promote the growth of Indian aviation sector in a significant manner as the development of this sector has a multiplier effect on the economy.  
 
“The government has proposed to take flying to the masses by making it affordable and convenient. For example, if every Indian in middle class income bracket takes just one flight in a year, it would result in a sale of 35 crore tickets, a big jump from 7 crore domestic tickets sold in 2014-15. This will be possible if the air-fares, especially on the regional routes, are brought down to an affordable level. The reduction in costs will require concessions by the Central and State Governments and Airport Operators,” states the civil aviation policy.
 
It looks good on paper and the private airlines have already capitalised on it. But Air India has continued to bleed.
 
“With regard to Air India Limited, it is likely to suffer a total net loss of Rs. 2,636 crore in 2015-16,” said Minister of State for Civil Aviation Mahesh Sharma in a written reply in the Lok Sabha in April 2016.
 
He said high interest cost and airport charges, increasing competition, particularly from budget carriers, coupled with exchange rate variation due to weakening of Indian rupee are reasons for the carrier’s estimated net loss during 2015-16.
 
A year earlier on December 3, 2015, Sharma told the Lok Sabha: “Post the merger of Indian Airlines and Air India Ltd, the merged entity i.e. Air India Ltd was running into continuous losses and had liquidity problems. In view of the losses suffered by Air India upto 2010-11 and its mounting debt burden, the CCEA in its meeting held on 12.04.2012, approved a Turnaround Plan (TAP)/ Financial Restructuring Plan (FRP) for operational and financial turnaround of Air India. The TAP/FRP provides equity infusion by the government of Rs 30,231 crores upto 2021 subject to achievement of certain financial and operational parameters as laid down in the TAP/FRP.
 
“AI has initiated the following steps in order to cut costs: Rationalisation of Loss making Routes ii. Induction of brand new aircraft on several domestic & international routes to increase passenger appeal iii. Phasing out & grounding of old fleet iv. Establishment of Integrated Operations Control Centre and Hub Control Centre in Delhi v. Freezing of employment in non-operational areas vi. Fuel Efficiency and Gap analysis conducted with the help of International Air Transport Association (IATA) and all the recommendations of IATA are being implemented resulting in substantial savings on fuel. Critical analysis of fuel consumption on all flights by setting up a Fuel Council and Fuel Manager vii. Closure of overseas offline offices at certain locations viii. Upgradation of IT infrastructure & Implementation of Quick Win IT solutions.”
 
Clearly things are not working out and it would be in the fitness of things to either sell or ground Air India so that money can be spent on key areas like education, health and skilling programmes that will help people get jobs.
 
Ashwani Lohani, chairman and managing director of Air India Ltd, told the Mint newspaper in 2016, “We have got huge debt on our books and debt servicing itself is one of the major challenges. The cost of servicing the debt itself is Rs 4,000 crore every year. What we are looking at is to earn enough to service it. It’s a burden of the past.”
 
That burden is proving too much and it is time to look for a suitor. That, however, is easier said than done.
 
Civil aviation minister Ashok Gajapathi Raju made a pithy comment to a TV channel: “There are hardly any bakras around, so to get one is difficult and businessmen are businessmen. There are limitations. One thing is for sure, the taxpayer's money cannot be committed for eternity. So, that is one problem. Failures are there on the financial front, so, there are problems and these will be attended to.”
 
Either find a ‘bakra’ fast or ground Air India. That’s the Gordian knot.

 

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