In terminal decline, Air India’s privatisation is a rosy dream

The periodic clamour for Air India’s privatisation had surfaced once again recently. The government should ask itself a simple question: Which investor, in his right senses, would want to invest in an airline in such an advanced state of terminal decline?

The figures are frightening. The airline’s loans now total Rs 48,400 crore, or $ 7.5 billion. Debt servicing on these loans alone totals Rs 4,000 crore a year. With that sort of money, one could start a new airline, with none of the warts that Air India has. That is not the end of the story. The airline recently had to take loans to pay the salaries of its employees. One would say things could hardly get any worse than that. Really? Air India could not declare even a minuscule net profit at the time fuel prices had hit rock bottom. All they could claim was a puny operating profit of Rs 105 crore. Then, the Comptroller and Auditor General dropped a bombshell. Even those figures had been fudged. It was actually an operating loss of Rs 321.4 crore. This, sadly, is not the end of the story either. CAG had added that the financial figures had been fudged for three consecutive years. Privatise? Forget it. No one will touch it with a bargepole.

Importantly, Air India’s biggest liability may be its public-sector corporate culture. In competition with private airlines that have immensely more nimble managements and well-selected, well-trained and highly motivated staff, Air India is the proverbial dinosaur of the airline industry.

Importantly, the UPA government had decided on the injection of about Rs 30,000 crore of additional capital into Air India. Much of it has already been transferred to the airline — with little to show for it. Frankly, very little has been done so far to turn the airline around.

While Air India has had access to the taxpayer’s money, it has paid a terrible price for being State-owned. As one example, all airlines have to mandatorily serve cities in India’s poorly developed northeastern region. Interestingly, the government does not specify which cities need to be served. Naturally, the private airlines concentrate on a few of the densest and least unprofitable routes, to larger cities like Guwahati, Agartala, and Bagdogra.

By contrast, State-owned Air India is made to serve about a dozen cities, including small ones like Agatti, Dimapur, and Lilabari. These are immensely unprofitable. An unacceptably large number of Air India’s routes lose money — some of them heavily. The airline is not allowed to operate according to its best commercial judgment.

There is an even more sordid side to being State-owned. The CAG has recently pointed out that as on March 31, 2017, Air India had not recovered unpaid dues totalling Rs 451.75 crore for chartered flights undertaken by government VVIPs. When a government owns an airline, surely its VVIPs cannot have free rides on it. Frankly, had Air India been on its own, rather than State-owned, it would have been much better off. It has been used as a milch cow. Everything a government touches turns to dust.

That brings up a fundamental question. What is the solution for Air India? As things stand today, Air India just cannot be saved. The government should have appointed a foreign consultant who specialises in airline turnarounds years back. The window of opportunity for that may be closing fast — if it has not done so already. There is nothing fundamentally wrong with the public sector as long as its management is allowed to act according to its best commercial judgment, and its actions are not compromised by government meddling. 

Should Air India fold up – as seems possible – the very saddest casualty will be its founder Chairman JRD Tata himself. He had managed it with loving care to make it one of the most-respected airlines of its day. He had used Indian skills and Indian talent to make it a showpiece public-sector airline, using the finest private-sector managerial skills, and had been globally honoured for that. That little gem of an airline could cheerfully cock a snook at competitors many times its size – and come out on top. Importantly, there was rarely a drop of red ink to blemish its balance sheets.

The Air India of today is a tragedy of Shakespearean proportions.

The author is a civil aviation industry analyst