Air India’s crash landing

After amassing a debt of around Rs 52,000 crore, Air India is once again on sale. Prospective buyers are looking at options like whether they should buy the whole stakes or whether they should opt for a different proposition? Government is yet to come out with the contours of the stake sale but the “in principle” nod for the national carrier’s disinvestment has generated a lot of interest in the aviation sector. Market leader IndiGo has made public its interest in buying Air India’s international operations as it plans to expand its business to long haul international services. Questions are also raised why should the government run an airline and that it should be left to the experts and private sector.

Many talks about the legacy issues, the manpower pool, the debt and how the national carrier lost out in the race. Lack of imagination at the top and the ‘chalta hai’ attitude of the workforce led to the downfall of the airline, many believe. The debt-trap could have been avoided and allegations surface that it was deliberately thrust upon the national carrier to help private sector players. Air India still had several routes which were surrendered meekly while a huge order for aircraft in the garb of expansion also put the airline in stress. The airline has a working capital loan of Rs 30,000 crore and 20-22,000 crore loan on airline purchase.

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The latest problems could be linked the decisions taken during UPA regime on aircraft purchase, lease of aircraft and giving up profit making routes. The CBI has already registered three cases, saying these decisions had caused “loss of tens of thousands of crores of rupees” to the exchequer.

The CBI FIR says the order to purchase 111 aircraft for Rs 70,000 crore caused financial loss to the “already stressed national carrier”. Initially, Air India had not decided to buy so many aircraft however the number rose from 28 in 2004 to 111 later. It said the leasing of a large number of aircraft without due consideration, proper route study and marketing or price strategy was unwarranted. Aircraft were leased even while the acquisition process was on.

The airline also gave up profit making routes and timings of Air India in favour of national and international private airlines — 12 international and domestic routes, including Bengaluru-Bhubhaneswar and Bengaluru-Ahmedabad sectors. The FIR is damning on the decision making process when it said, “it is claimed that on the directions of the Ministry of Civil Aviation, issued in conspiracy with private domestic and foreign airlines, Air India withdrew its services from many profit-making routes and gave away its routes to private and foreign operators without taking any reciprocal benefits”. It goes on to say that on all routes vacated by Air India “private airlines namely Jet Airways, (now defunct) Kingfisher Airlines, GoAir, IndiGo, SpiceJet, Paramount Airways etc started operating and made profits”. On lucrative routes like Mumbai-Dubai or Mumbai-Ahmedabad, Air India reduced flights and gave “its opponents a major market share”. Foreign airlines were given unrestricted entry into India and major routes were given to them without taking any reciprocal benefits for the national carrier.

These are still allegations in an FIR filed by CBI and yet to be proved in a court of law. But if true, several Air India watchers vouch for the veracity, it shows how systematically the national carrier was made a deadwood. Left parties have already raised a hue and cry over the disinvestment plan. CPI(M) says Air India was “crippled and burdened” with debt due to “monumental miscalculation and certain wrong decisions taken by successive governments at the Centre” and the airline is now being made the “scapegoat and sought to be privatised”.

It appears that the national carrier was treated by government and its management as something that should be sold out at any cost. While the government should not discriminate private players, many actions taken were counter-productive to Air India. Air India was not allowed to flourish, as if someone was always putting some blocks on the road against the national carrier. However, in the past couple of years, the airline was on a recovery path and has posted operational profit. The question has to be asked how it amassed such debt. Why it landed in such a financial mess? Why is not Air India the preferred airlines? Is only UPA regime on the wrong? Has the decision not to buy aircraft between 1998 and 2004 had an impact on the national carrier? Who is responsible for these? The country needs to know as the airline is now on for sale.

(An edited version appeared in Deccan Herald on July 9, 2017)

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