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Medium Term: Air India should have been sold 20 years ago

I know that parliamentarians were agitated and incensed last week by Civil Aviation Minister Ajit Singh’s

claim that India did not need a national carrier.       But you know what?       He’s absolutely


   Take the current mess in Air-India. The striking pilots claim that the reason the airline is in a mess is because it has been mismanaged. They say that bureaucrats with no experience of aviation have run the airline for decades and have failed to manage it in a competent and professional manner. Further, they add, the merger of Air-India and Indian Airlines was mishandled by the Civil Aviation Ministry.

   The government, for its part, claims that Air-India’s current problems stem from the attitude of the staff, chiefly the striking pilots. The employees of Air-India, say ministers and officials, behave as though the airline is run for their own benefit and not for the sake of passengers.
   Taxpayers wonder why we should be expected to subsidise this wrangle between employees and the government. The Cabinet has just okayed a payment of Rs. 30,000 crores for Air-India. Over recent years, crores of other funds have also been poured into the airline by the exchequer.

   If this cash infusion works (and the chances of that happening are on par with the likelihood that pigs will fly, the moon will be blue and Jaya Bachchan and Rekha will become best friends), then the best we can hope for is the mere survival of the airline. Nobody even dares to suggest that Air-India will become so profitable that it might be able to return these Rs 30,000 crores to us, the taxpayers.

   So it is not even an investment; just a lifeline.

   You can argue about whether the pilots are justified in striking. You can dispute, as officials do, that mismanagement is at the core of Air-India’s problems.

   But here’s what you can’t disagree with: none of these problems would exist if Air-India was not government owned and managed.

   If Air-India was a private airline, the striking staff would have been disciplined or sacked a long time ago. They would have been told: if you don’t like the way we do things, then go ahead and join another airline. For instance, many Kingfisher employees have, over the last two years, voluntarily packed their bags and left the troubled airline and found jobs elsewhere.

   So why have Air-India employees been less willing to leave?

   Well, mainly because they believe that when it comes to the crunch, they will get what they want because the government will cave in. And because, with the slump in the aviation business, they know that they will still make more money out of Air-India than from any other private airline.

   After all, you and I will pick up the tab. Always.

   If Air-India was not government-owned, private share-holders would have been horrified by the thousands of crores that the airline has lost annually, over the last few years. They would have stepped in, forced cut-backs on the management, sacked top executives and re-thought the airline’s strategy.

   But because Air-India can count on the generosity of the tax-payers, no such process has taken place.

   Losses have continued to mount. The top managers have kept their posts. Every full-time employee knows that his or her job is secure. And things have gone from bad to worse.

   "As tax-payers, you and I believe that we are being forced to reach into our pockets and to pay thousands of crores to subsidize Air-India."

   Nor do those at the very top care what happens to Air-India in the long-run. If Jet Airways goes under, Naresh Goyal will lose millions. But by the time Air India declares its next Rs 11,000 crores loss, the Civil Aviation Secretary will have gone to some other ministry and Ajit Singh will have moved on. Nobody is going to be around long enough to be held accountable for the mess in Air-India. So, nobody bothers about the consequences of today’s actions. They know that by the time the solids hit the air-conditioning, it will be somebody else’s problem.

   Is there a way out of this mess?  What are the options?

   Frankly, the options will continue to narrow by the day. The best time to have done something about Air-India was in the early 1990s. In those days, the private sector had not yet entered the Indian aviation industry and the global model for privatisation was British Airways. Margaret Thatcher’s government had taken state-owned BA and sold it off, in tiny chunks, on the stock market. The consequence was that British Airways was a listed company with thousands of shareholders, both individuals and institutions, who elected a board of directors and allowed the airline to be run professionally.

   There was an informal agreement within the government that Air-India would be privatized in this manner --- and so Yogi Deveshwar was brought in from ITC to run the airline as Chairman. Deveshwar ran it so successfully that by 1993, Air-India was making a profit of Rs 1 crore a day. (And in those days, a crore was a lot of money). Investors were drawn to the airline and had Air-India been floated on the stock market then, the listing would have been a huge success.

   But Prime Minister Narasimha Rao changed his mind. (As he did about ITDC). Successive governments also funked it. The NDA made a half-hearted attempt to privatize Air-India and Indian Airlines but then, scrapped the plan when it was dis-satisfied with the number and quality of bids.

   Since then, Air-India’s problems have mounted. Once the private carriers reached a critical mass, Indians began to regard Air India as a third-rate airline, hardly in the same league as Jet, Indigo and the others. Foreigners also stayed away in droves.

   Now, Air-India is no longer as attractive a proposition as it was in the 1990s. But privatization of any sort is still better than the mess we find ourselves in at the moment. Perhaps, Air-India will not fetch a good price. But at least taxpayers will not have to pay Rs 30,000 crores to keep it in the air.

   Privatizing Air-India will also take care of the complaints that all parties to the current dispute have registered. Pilots say that the government has mismanaged the airline. Fine, let’s remove the government from the equation and let them deal with private sector managers then. The Aviation Ministry says that the pilots are spoilt and unreasonable. Fine, let’s make sure that the IAS never has to deal with these spoilt pilots again. Let’s get some private sector owners involved.

   As tax-payers, you and I believe that we are being forced to reach into our pockets and to pay thousands of crores to subsidize Air-India. So fine, let’s privatize the airline and then we won’t have to subsidise it any longer.

   Why then is nobody talking about privatisation?

   Basically, I think it is because politicians are wedded to the bizarre socialistic idea of a state-owned national carrier. When you tell them that America has no state-owned airlines, they seem startled. When you inform them that British Airways is not, in fact, owned by the British government, they are astonished. And when you point out that even Aeroflot has private shareholders, they just look disbelieving.

   In fact, the time has come for our politicians to finally do what they should have done 20 years ago: sell Air India.

   Perhaps the pilots are justified in striking. Perhaps the management is right when it says pilots are being unreasonable.

   But here’s the thing: I don’t really care.

   It’s not my job to get into the rights and wrongs of every industrial dispute. The only reason Air India matters is because each strike at the airline costs me money. At a time when the Indian economy is collapsing, you and I are spending thousands of crores to keep these squabbling jokers in the air.  (And these days, they are not even in the air, but are sitting at home, inconveniencing passengers).

   So ask yourself this: do we really need to run an asset that causes us nothing but aggravation and costs us so much? Think of all the schools, roads and hospitals we could build with this money if we stopped subsiding Air-India.

   Let’s just get rid of it. Let’s sell the airline. Let’s try and get the best price we can. And let’s wash our hands off Air-India.

   The private sector knows how to run airlines. The government does not. And we taxpayers have better things to do with our money.



  • R Gorayan 06 Aug 2012

    Good article, though I disagree with 2 things. Politicians aren't wedded to socialism etc; it's just that they won't be able to milk it if it was privatized. The other point is that an Indian airline *can* be run profitably because labor costs work in our favor. (The 1993 balance sheet proves this.) Finally, the options do include a public-private partnership (sort of slowly privatize it) or a BOT/BEL or even draft all AI staff into the military (so the Prez can "order" them back to work).

  • waseem 16 Jul 2012

    Very thooughtful article.

  • agrawalkk 07 Jun 2012

    Public is being considerd a milch cow by the government of india to make up the deficit created by mismangement by government itself in every area not only national carreir only. Our political bosses are benefiting a few at the cost of honest tax payer's money, due to absense of rule of accountability.

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