Thursday, June 24, 2021

Privatise Air India

Despite several doses of capital infusion, Air India, the ailing public sector airline, has been unable to come out of the red. Time has now come to revisit the aviation policy because taxpayers’ money can’t sustain the loss-making airline forever. There is a strong case for privatising the state-owned airline burdened by a poor legacy of public-sector corporate culture, political interference and bureaucratic controls. The government has pumped in more than Rs 40,000 crore so far to keep it afloat. This includes equity support of Rs 24,745 crore since 2011-12 as part of the total bailout package of Rs 30,000 crore over a ten-year period. Civil Aviation Minister Ashok Gajapathi Raju himself recently admitted that the bailout plan to save the national carrier has not solved the problems. The airline’s loans now stand at Rs 48,400 crore and the annual debt servicing on these loans alone amounts to Rs 4,000 crore. The Comptroller and Auditor General has concluded that the airline lost over Rs 6,000 crore since 2012-13. The difference between the now-grounded Kingfisher and Air India is that the taxpayer is still funding the national carrier despite its poor performance while Kingfisher was abandoned by its profligate promoter who failed to raise more funds to keep it afloat. While private airline companies have been able to take advantage of low aviation fuel prices to keep their operating costs in check, Air India’s operating costs are simply unsustainable. As a result, net profit continues to elude the airline.

The successive governments have been hesitant to give up control despite experts questioning the rationale behind pouring the scarce public funds into a perennially loss-making enterprise. The Economic Survey 2017 has also favoured privatisation of Air India but spoke about the difficulties in taking the plunge. Air India has the largest fleet of 140 planes in the country, including the Boeing Dreamliner planes, and flies to 41 international and 72 domestic destinations. It is the biggest international carrier from India with a 17% market share and also controls 14.6% of the domestic passenger market. Over decades, it has suffered due to political interference, unprofessional mismanagement and a bureaucratic culture that seeks to perpetuate VIP privileges. As of March 31, 2016, the gross value of the airline’s fixed assets was Rs 46,074.07 crore while its long-term borrowing was Rs 35,806 crore. In 2006, consulting firm Accenture was signed up to execute a merger between Air India and Indian Airlines. Recently, three consulting firms—McKinsey and Co, Bain and Co and EY— were shortlisted to draw up a business strategy for the coming years. There is a valid ground for the government to exit the airline business.

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