• Is There Any Point In Trying To Revive Air India Prior To Sell-Off?

    The government wants to dress up the bride before giving it away in marriage. The bride in question is Air India and ‘dressing up’ refers to the revival of the ailing airline before it is reportedly put on the block for disinvestment.

    According to reports, one of the recommendations of the Niti Aayog—which has been tasked with drawing up a list of public sector undertakings (PSUs) for disinvestment—is to revive Air India before any disinvestment. The Aayog has included Air India in a list of 22 PSUs where revival will have to happen before any value can be realised through disinvestment.

    The only problem is Air India is past its sell-by date as far as revival is concerned. Don’t get taken in by the airline declaring a modest eight crore operational profit in 2015-16, even though this is the first time in a decade that the airline has used the word ‘profit’. Even assertions by the Chairman and Managing Director Ashwani Lohani of achieving an exponential increase in operational profits, to about Rs 800 crore in the current fiscal, are of no consequence. Reports suggest Lohani is eyeing the post of Chairman of the Railway Board, and lofty financial targets could well be left for his successor to achieve.

    Former Executive Director at the airline and the author of ‘Descent of Air India’ Jitender Bhargava says Air India was one of the first companies to be referred to the disinvestment commission in the 1980s. “30 years later, we are still talking about its revival. Isn’t past performance enough indication that revival is either difficult or not feasible at all with the current management structure and continuous political interference?”

    In his book, Bhargava identified three major events that led to Air India’s descent: the inability of the government to go in for disinvestment, the ill-advised aircraft acquisition programme and the merger of Indian Airlines and Air India. In the late 1990s, there was a proposal by the Tata group and Singapore Airlines to become strategic partners to provide professional management to Air India. But this fell through, allegedly because of vested interests. As for the aircraft acquisition programme, it cost an estimated Rs 40,000 crore and became the genesis of the airline’s eventual financial crisis. Air India still has about Rs 4,000 crore as annual debt repayment, largely because of this aircraft order.

    Now the government has promised Rs 30,000 crore equity support to Air India, of which over Rs 22,000 crore has been given till date. The airline is sticking to its turnaround plan under which this money was given. However, to understand why Air India’s revival is a mirage, one must read the fine print of its operational performance in 2015-16, when it was roundly argued that the airline has emerged from losses.

    First, it has only made an operational profit (that too, a mere eight crore in 2015-16), and there is no talk of net profit in the near future.

    Second, these figures are on the basis of unaudited results.

    Third, this modest operational profit came almost entirely from benign fuel prices and earnings from sale & leaseback activities. Not from a tight cost control or any marked improvement in other operational parameters. Niles Paul Womens Jersey

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